US stocks were mixed on Thursday but the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) finished higher to close their best month this year as investors continued to bet on interest rate cuts after a key reading on consumer inflation.
The Dow Jones Industrial Average paced gains with a jump of nearly 1.5%, or more than 500 points, reaching a new closing high for 2023. The S&P 500 popped nearly 0.4%, reversing earlier losses, and the tech-heavy Nasdaq Composite (^IXIC) fell 0.2%. All three of the major averages finished the month of November with their highest monthly gains in 2023.
November's monster rally was powered by optimism that the Federal Reserve is done with hiking interest rates.
On Thursday, stocks were buoyed by the release of the PCE index, the Fed's preferred inflation measure, which came in line with expectations in showing that inflation cooled to its lowest levels since 2021. The print could add more fuel to the notion that the Fed is done with hiking this cycle and may cut rates sooner than thought.
Thursday also brought a surprise November drop in euro zone inflation to 2.4%, seen as challenging the European Central Bank's stance that price growth is stubborn.
Oil prices swung as OPEC+ agreed to additional output curbs of 1 million barrels per day, but lack of specificity led to skepticism over each country's commitment. WTI (CL=F) fell nearly 3% to trade below $76 a barrel, while Brent (BZ=F) crude futures slipped to below $83.
Dow lifts 500 points in late Thursday rally
The Dow Jones Industrial Average paced gains with a jump of nearly 1.5%, or more than 500 points, while the S&P 500 popped nearly 0.4% and the tech-heavy Nasdaq Composite (^IXIC) fell 0.2%.
November's gains are a bullish sign for stocks well beyond 2023
The S&P 500 is set to close November with its highest monthly gain in more than a year. And the good news for investors is that likely means stocks will perform above average moving forward.
Research from eToro's Callie Cox shows that when a one-month rolling return for the S&P 500 hits more than 9.2%, a stat the benchmark average reached earlier this week, then the path forward is usually higher.
On average, stocks gain 14.9% in the 12 months after a run like the recent spurt for stocks. Anything lower brings the S&P 500 an average return of 8.7%.
"Momentum begets momentum in the stock market, that can work in the bulls' favor," Cox said.
Stocks trending in afternoon trade
ImmunoGen (IMGN) led the Yahoo Finance trending tickers page on Thursday. Shares soared more than 80% after drugmaker AbbVie (ABBV) agreed to pay more than $10 billion to invest in cancer treatment created by ImmunoGen.
Snowflake (SNOW) shares surged about 7% after the company reported better-than-expected quarterly results. The company set revenue guidance for the current quarter in a range of $716 million to $721 million, well above Wall Street's estimates for $696 million.
Salesforce (CRM) stock also popped, rising more than 8%, after better-than-expected earnings. Salesforce's adjusted earnings per share guidance for the current quarter, a range of $2.25 to $2.26 per share, topped the Street's estimates for $2.17.
The 60/40 portfolio is having its best month in three years
The roaring November rally has brought many of investors' least favorite trades back to life. That includes traditional asset allocation method of 60% stocks and 40% bonds.
About a month ago, we highlighted that the 60/40 portfolio was on one of its worst stretches in recent memory.
That's reversed this month with the combination of the S&P 500 and Bloomberg Aggregate Bond Index rising 7.3% in November. Per Bespoke Investment Group that's "the best showing for 60/40 since 2020, the second-best in over 30 years, and a top ten all-time showing."
Below is a graph from Bespoke that highlights the portfolio's performance.
Stocks mixed in afternoon trade
Stocks are split on the final trading day of November as the S&P 500 and Nasdaq try to close out their best month since July 2022.
The Dow Jones Industrial Average (^DJI) paced gains with a jump of about 0.7%, or about 250 points, while the S&P 500 (^GSPC) slipped 0.1% and the tech-heavy Nasdaq Composite (^IXIC) fell more than 0.6%.
Nelson Peltz's proxy battle with Disney heats up (again)
Nelson Peltz's Trian Fund Management is moving ahead with a proxy fight at Disney (DIS).
The activist hedge fund said in a press release on Thursday morning that Disney extended an offer to Trian to meet with the board but turned down its recent request for representation, including for Peltz himself. The firm said it now intends to take its case directly to shareholders.
According to a source familiar with the matter, Trian is seeking multiple board seats at Disney. Peltz has an ally in former Marvel executive Ike Perlmutter, who has entrusted his stake in the company to Trian.
"Disney's share price has underperformed proxy peers and the broader market over every relevant period during the last decade and over the tenure of each incumbent director. Investor confidence is low, key strategic questions loom, and even Disney's CEO is acknowledging that the Company's challenges are greater than previously believed," Trian said.
Disney pointed to its cost-cutting efforts in the past year in a statement in response.
"Over the past twelve months, we restructured the company to restore creativity to the center of all our businesses as we significantly reduce costs and drive efficiencies, and we are on track to achieve about $7.5 billion in cost savings – $2 billion more than our original target," the company said.
Disney also noted that Perlmutter owns 78% of the shares that Peltz claims beneficial ownership of, which amounts to more than 25 million of 33 million shares.
"This dynamic is relevant to assessing Mr. Peltz and any other nominees he may put forth as directors, as Mr. Perlmutter was terminated from his employment by Disney earlier this year and has voiced his longstanding personal agenda against Disney’s CEO, Robert A. Iger, which may be different than that of all other shareholders," Disney said.
Trian's statement comes a day after Disney announced in an SEC filing that James Gorman, chairman and CEO of Morgan Stanley, along with Jeremy Darroch, former head of British television company Sky, will join its board early next year.
"While James Gorman and Sir Jeremy Darroch represent an improvement from the status quo, the addition of these directors will not, in our view, restore investor confidence or address the root cause behind the significant value destruction and missteps that this Board has overseen," Trian said.
Disney shares were flat in afternoon trading on Thursday. The stock, down about 6% since the start of the year, has dipped nearly 20% since the end of Peltz's previous proxy battle in February.
OPEC+ agrees on additional output cuts
Oil has had a volatile trading session in reaction to the latest production decision from OPEC+. After initially trading higher, West Texas Intermediate (CL=F) futures fell nearly 2% after 11 a.m. ET on Thursday.
The OPEC+ group on Thursday agreed to additional output curbs of 1 million barrels per day in a move that could send oil prices higher. The deeper reductions come alongside an extension of Saudi Arabia's unilateral reduction of 1 million barrels per day.
The move was reported by multiple outlets, citing delegates at the group's meeting. Members of OPEC+, the consortium of some the world's largest producers and its allies, will vote on the deal at the group's meeting Thursday.
“Production increases in the US, Guyana, and Brazil will soften the blow caused by OPEC’s announced production cuts but that doesn’t mean consumers in the US won’t feel some sting from this at the pump," KPMG US energy leader Angie Gildea said immediately following the announcement.
"Further, even though weaker global economic expectations have been keeping prices relatively low right now, it just takes one wild card event to disrupt the market and put us back in a tight supply situation that could send prices back up," added Gildea.
Pending home sales hit 20-year low
With higher mortgage rates at the top of homebuyers minds, fewer people are buying houses.
Contract signings for existing homes logged their slowest pace in more than two decades in October.
Home sales under contract dropped 1.5% from the month before, according to the National Association of Realtors on Thursday. The 71.4 index reading is the lowest since the index's founding in 2001. An index level of 100 is equal to the pace of contract activity in 2001.
Still, the results were better than the 2.0% decline that Bloomberg economists had estimated and come after a bigger slide in new home sales that same month.
The drop in the index, a leading gauge used to assess the housing market’s health, still reflects how rising rates in October again unnerved budget-sensitive buyers and pushed pending sales in the resale market down by 8.5% annually.
“Rates were hovering around 8% in October. They were the highest in 23 years, which pushed affordability to a record low,” RSM US real estate senior analyst Crystal Sunbury told Yahoo Finance ahead of the release. “We'll see pending home sales falling accordingly in October.”
Stocks open higher
US stocks climbed on Thursday morning, on track for their best month this year as investors continued to bet on interest rate cuts after a key reading on consumer inflation.
Fed's preferred inflation gauge hits lowest levels in more than 2 years
Inflation continued to cool in October.
The Personal Consumption Expenditures (PCE) index grew 3% year over year for the month, down from 3.4% in September and in line with expectations. That marks the slowest pace of inflation growth since March 2021.
"Core" PCE, which excludes the volatile food and energy categories, grew 3.5%, down from 3.7% the month prior and in line with what economists surveyed by Bloomberg had expected.
Month over month, core PCE rose 0.2% in October, down from 0.3% in September.