As the U.S. trading week experiences a reduction in activity due to the Thanksgiving holiday, it becomes imperative to closely monitor the stock market's performance and ascertain whether the upward momentum witnessed in the past month can be sustained through the remainder of the year.
The month of November has seen a notable surge in stock values, with the S&P 500 index, as reported by FactSet data, recording an 8.6% gain month-to-date. Furthermore, the index has marked an 18.6% increase for the year thus far.
Offering insights into the market dynamics, Quincy Krosby, Chief Global Strategist for LPL Financial, remarks that a consolidation at this juncture is deemed normal, especially for a market that has experienced an overbought condition. However, Krosby cautions that if this consolidation precipitates a substantial selloff, resulting in the S&P 500 dipping below the critical 4,400 level, it could raise concerns within the market. Krosby emphasizes the significance of breaching key levels, suggesting that such occurrences may indicate more profound issues at play.
Despite potential consolidation concerns, market participants find solace in the historical seasonality trends that typically provide a tailwind to the stock market during the fourth quarter. Greg Bassuk, the CEO at AXS Investments, expresses optimism about a robust year-end rally. Bassuk attributes this positive outlook to the abatement of inflation, a more dovish stance from the Federal Reserve, and investors digesting robust earnings data. Nevertheless, he acknowledges the possibility of market choppiness in the upcoming weeks.
The holiday-induced truncated trading week is anticipated to witness lower-than-usual trading volumes, a pattern observed since 2019. Data from Dow Jones reveals that the rolling five-day average of total market volume hovers around 52.5 billion, whereas the five-day average volume for the Thanksgiving week is 44.7 billion. Quincy Krosby highlights the impact of reduced volume, suggesting that it can potentially influence the market in either direction.
Investor attention is also directed toward consumer spending data during the holiday season, with an understanding that positive momentum in stocks is likely to persist unless specific issues arise with holiday spending. Louis Navellier, chairman and founder of Navellier & Associates, underscores the continuity of this positive momentum, emphasizing its self-fulfilling potential as the year concludes.
Wednesday witnessed an upward trajectory in U.S. stocks, with the Dow Jones Industrial Average rising by 0.5%, the S&P 500 increasing by 0.4%, and the Nasdaq Composite advancing by 0.5%, according to FactSet data. It's worth noting that U.S. markets are closed on Thursday, followed by an abbreviated trading session on Friday.
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