Wall Street will endeavor to keep the November momentum going in the final month of 2023, as investors look for a broadening out of the rally that has been dominated this year by a handful of tech names. Stocks ended a three-month losing streak this week, with the Dow Jones Industrial Average on Thursday surging to a new high for the year, as some cooling inflation reports buoyed investor hopes the Federal Reserve is done hiking interest rates and can start cutting next year. November was the best month for the 30-stock Dow since October 2022. It also marked the best monthly performance for the S & P 500 and Nasdaq Composite since July 2022. Investors hope stocks continue their bullish run in December, as other concerns that weighed on markets start to recede. The 10-year Treasury yield , which shook markets when it topped 5% in October, fell to below 4.3% in November. A stronger dollar has started to pull back. And spiking oil prices have also steadied. “If, in fact, that continues in December, I think those will continue to be tailwinds for markets,” said Art Hogan, chief market strategist at B. Riley Financial. “I think all three of those likely continue to drive markets higher, and continue to drive more of a risk-on attitude.” Seasonally speaking, the odds are high stocks will continue to outperform. December has been the third-best month for both the Dow and S & P 500; since 1950, the two indexes gained 1.5% and 1.4% on average, respectively, according to The Stock Trader’s Almanac showed. A broadening of the rally Just seven stocks have driven the stock market in 2023 — Apple, Amazon, Alphabet, Nvidia, Meta, Microsoft and Tesla. In November, however, some signs of broadening participation encouraged investors. The S & P 500 leaders in November included travel stocks such as Carnival and Expedia Group , as well as media names such as Paramount Global . In December, traders are hoping the market strength will extend to more of the other 493 stocks in the S & P 500. While the S & P 500 cap-weighted index climbed more than 18% this year, the equal-weighted index is up by just over 4%. Small caps are one notable area of that could outperform given the widening spread in the performance between these assets and larger equities. While the larger cap Russell 1000 index is up by more than 18% in 2023, the smaller cap Russell 2000 index is higher by just more than 2%. The seasonal trends are also in favor of small-cap stocks in December. According to the Stock Trader’s Almanac, small caps tend to outperform blue-chip stocks toward the second half of the month. “You don’t historically see small caps being left behind by as much as they are this year,” Hogan said. “And I would say the drivers for the S & P’s rally — the dollar, the Treasury yields, and energy prices — all of those are constructive for small caps as well, even more so.” More investors are also finding value stocks increasingly attractive. They highlight the attractive relative valuation of value stocks compared to growth stocks, as well as the significant underweighting of value names in portfolios by traders. For example, the Russell 3000 Growth climbed roughly 34% this year, while the Russell 3000 Value is up more than 2%. In fact, Olivier Sarfati, head of equities at GenTrust, said he expects to add exposure, and anticipates the value vs. growth match will be important to watch in 2024. “Each time growth keeps on outperforming value, we’ll want to take money away from growth and allocate it to value,” GenTrust’s Sarfati said. “Of course, it’s going to be the big conversation of 2024. At some point, the value people will be right. And the question is, is it going to be in 2024, is it going to be 2025 or in 2026? I think it’s going to be in 2024.” Carlos Asilis, co-founder and investment chief at Glovista Investments, agreed, and urged investors to start building their positions. “We do like the value sectors in the U.S. market, more than the growth sector,” Asilis said. “So, you know, energy, financials, I think are likely to do better than they did earlier in the year.” Elsewhere, traders will watch for further economic data in December for confirmation the Fed is done hiking and can start to cut next year. Next week, the November jobs report that’s set to release Friday is expected to have been held in line with the prior month’s reading. Economists polled by FactSet are anticipating U.S. nonfarm payrolls to have risen by 150,000 for the month, matching October’s gain. They’re expecting the unemployment rate to have held steady at 3.9%. Week ahead calendar All times ET. Monday, Dec. 4 10 a.m. Durable Orders (October) 10 a.m. Factory Orders (October) Tuesday, Dec. 5 9:45 a.m. PMI Composite final (November) 9:45 a.m. Markit PMI Services final (November) TK check this it’s not markit anymore 10 a.m. ISM Services PMI (November) 10 a.m. JOLTS Job Openings (October) Earnings: AutoZone , J.M. Smucker Wednesday, Dec. 6 8:15 a.m. ADP Employment Survey (November) 8:30 a.m. Unit Labor Costs (Q3) 8:30 a.m. Productivity (Q3) 8:30 a.m. Trade Balance (October) Earnings: Campbell Soup Thursday, Dec. 7 8:30 a.m. Continuing Jobless Claims (11/25) 8:30 a.m. Initial Claims (12/02) 10 a.m. Wholesale Inventories final (October) 3 p.m. Consumer Credit (November) Earnings: Dollar General, Broadcom Friday, Dec. 8 8:30 a.m. Nonfarm payrolls Report (November) 10 a.m. Michigan Sentiment preliminary (December)
