As of the closing bell on Friday, the Dow Jones Industrial Average (DOW), S&P 500, and Nasdaq have registered approximate gains of 0.93%, 0.99%, and 1.21%, respectively, since the commencement of December 1, 2023. This positive trajectory follows a noteworthy performance by all three indices in the preceding month of November. The unveiling of key US economic indicators on Friday, encompassing unemployment and non-farm payrolls data, revealed a notable decline in November's unemployment rate to 3.7% contrary to consensus estimates anticipating no change at 3.9%. Additionally, non-farm payrolls surpassed expectations, reaching 199,000 compared to the consensus estimate of 180,000. The resurgence of auto workers and Hollywood actors following the UAW and WGA strikes earlier in the year is deemed largely responsible for this upswing.

Weekly sector performance ranked as follows:

• Communication Services - 1.45%

•  Technology - 0.68%

• Consumer Cyclical - 0.43%

• Financial - 0.38%

• Industrials - 0.21%

• Healthcare - (0.01%)

• Utilities - (0.22%)

• Real Estate - (0.26%)

• Consumer Defensive - (1.24%)

• Basic Materials - (2.02%)

• Energy - (3.20%) 

The market activity observed on Friday suggests that both traders and investors are embracing the robust labor market conditions, anticipating that Jerome Powell and the Federal Reserve Committee may enact substantial rate cuts in 2024. However, it is essential to approach this sentiment with caution. Although a robust labor market is undeniably beneficial for a significant majority of Americans, the correlation between a strong labor market and positive market outcomes is not unequivocal.

Referencing the insights shared in the article titled "Market Mirage or Mastery" published on December 2, 2023, the prevailing macroeconomic thesis underscores a need for caution in order to assimilate the developments witnessed in the market over the past 45 days. It is imperative to clarify that when alluding to 'weakness,' it is not indicative of an anticipation for an additional correction or a significant downtrend. Rather, the expectation is for a modest adjustment within the range of 3-5%. Addressing a common misconception, there exists a widespread notion that acknowledging down days or pullbacks as a long-based investor is synonymous with disloyalty. This misperception is unfounded, and it is time to dispel such notions. Acknowledging market fluctuations and exhibiting a realistic perspective is prudent; after all, only a fool would disregard the fact that markets experience both upward and downward movements.

The impending two-day session of the Federal Open Market Committee, scheduled for this upcoming Tuesday and Wednesday, is poised to be a pivotal event. The Federal Reserve's current projection for the funds rate at the conclusion of 2024 stands at 5.1%. Nevertheless, a discernible variance emerges as traders and investors present alternative projections, vividly illustrated in the accompanying graph. Notably, their current estimates deviate by approximately 19% from the committee's forecast. This substantial dissonance holds the potential to substantiate our hypothesis of a measured market downturn. Presently, I am inclined to believe that neither Powell nor the committee will provide indications of impending rate cuts during this session. The robust economic data previously discussed is likely to serve as the cornerstone of Powell's rationale for advocating the continuation of the current 'pause' in monetary policy.

Examining the intricacies of the pause and pivot narratives, proponents of bullish sentiments ought to appreciate Chairman Powell's articulated response. While overbought conditions in the indices may persist in their ascent, unlocking the desired momentum necessitates an infusion of additional liquidity by overzealous sellers. Bears, having narrowly weathered setbacks in every pullback this year, continue to hold onto the hope of an impending market reversal. Offering a modicum of hope to the bearish contingent may strategically contribute to fueling the anticipated surge for the Santa Claus Rally. Moreover, let us delve into a chart that aligns harmoniously with Powell's advocated 'pause' stance.

Contrary to prevailing perceptions, Powell's strategy of "Higher for Longer" has proven to be a boon for bullish market participants. As illustrated above, aside from a few isolated instances, the market tends to cease its decline when the Federal Reserve initiates rate cuts. It is plausible that market participants may have preemptively positioned themselves ahead of the FOMC meeting, possibly leading to last week's undue exuberance. Nevertheless, in the event that any vulnerabilities manifest following the FOMC meeting, Bankfluence holds the opinion that seizing this opportunity to augment risk within the portfolio aligns strategically with the transition into the 2024 calendar year.

Leading Lights: This Week’s Standout Stocks

A screener of large and mega-cap stocks, each with a daily volume exceeding 1 million, with the greatest one-week performance is outlined below.

December 4 - December 8, 2023 Top 10 Large/Mega Cap Best Weekly Performance

• HOOD (Robinhood) - 25.86%

• CCL (Carnival Corp) - 14.91%

• ERIC - 12.75%

• AFRM (Affirm) - 11.68%

• WBA (Walgreens) - 11.40%

• CVS (CVS Health) - 9.67%

• COIN (Coinbase) - 9.61%

• SPOT (Spotify) - 9.61%

• LCID (Lucid Motors) - 9.24%

• LUV (Southwest Airlines) - 8.92% 

*Generated through a Finviz screener. Actual performance may vary slightly +/-%

An intriguing pattern discerned from our scanner reveals that merely two companies within our top 10 screen are affiliated with the 'technology' sector. Moreover, a noteworthy continuation of exceptional performance is observed in two companies previously highlighted in our November monthly top 10 screen: Affirm and Coinbase. The unexpected prominence of 'Robinhood' as the top-ranking stock this week adds a compelling twist to the unfolding narrative.

In essence, these emerging trends lead us to a singular conclusion: over the past nine months, the market exhibited an apparent reluctance to recognize notable performances beyond the realm of the 'Magnificent 7'.  However, the dynamics have notably shifted in the last 45 days, signaling a market that is diversifying and once again embracing the nuances of individual stock picking. While many of these stocks are rebounding from historically low levels, the preceding nine months encapsulated a period that can be described as one of the most uneventful in Bankfluence's market experience. We refrain from delving into speculations about the orchestrators before the shift, but for those attuned to market dynamics, the clarity is unmistakable.

Bankfluence's technical analysts are set to conduct a comprehensive examination of the charts pertaining to select companies, with a focused emphasis on those exhibiting potential for upward momentum. These insightful analyses will be disseminated and shared with our Twitter community, the preferred platform for such communications. We encourage vigilant anticipation, as these charts will be unveiled prior to the market opening on Monday.

Wishing you a delightful and rejuvenating weekend, and for enthusiasts, a triumphant weekend for the Cowboys!

Citations:Fed Rate Cuts Are Unikely in 2024, Given That the Economy Remains Strong and Inflation Under Control - Barron's (barrons.com)