Market Pauses Following Last Week’s Rally as Investors Await Catalysts

The stock market saw a relatively muted start to the week, with Wall Street grappling to maintain the momentum generated by last week’s robust rally. The S&P 500 and Nasdaq Composite inched up by around 0.1% and 0.2%, respectively, while the Dow Jones Industrial Average added a modest 14 points.

Adam Sarhan, CEO of 50 Park Investments, provided insight into the market’s behavior, explaining, “What we’re seeing is the market pausing to digest that very strong rally last week. You’re in a situation where the market’s just pausing to consolidate the recent move and wait for the next bullish catalyst to come out, and that could likely be one of the Fed heads, Powell, or earnings.”

Nvidia received a boost, with its stock rising by 0.8%, fueled by optimism from Bank of America ahead of its earnings report. Bumble’s shares, on the other hand, experienced a nearly 6% drop following the announcement of its CEO’s impending departure in January. Meanwhile, shares of SolarEdge Technologies tumbled by 7% due to a downgrade from Wells Fargo.

Yields exhibited an upward trend, reversing the pattern seen in the previous week. The 10-year Treasury yield increased by approximately 10 basis points, reaching 4.66%.

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Last week marked the best week for stocks in 2023, with the Dow achieving its most significant weekly advance since October 2022. Simultaneously, the S&P and Nasdaq Composite enjoyed their best weeks since November 2022. The release of a soft monthly jobs report also contributed to the boost in equities, as it led to a drop in bond yields.

Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, offered insights into the market’s performance, stating, “The stock market has had a strong start to November, and the move seems deserved in light of what we’re seeing in most, though admittedly not all, of our sentiment indicators. Generally, our view over the last month or so has been that if the surge in yields stopped soon, US equities could escape without incurring too much additional damage.”

The upcoming week is expected to be relatively light in terms of economic data and company earnings, but seasonal tailwinds may assist in propelling the stock market’s recovery. November holds the title of the best-performing month for the S&P 500, according to the Stock Traders’ Almanac. Additionally, Adam Turnquist of LPL Financial noted that November initiates the best six-month return period for the market since 1950. During this period, the S&P has historically generated an average return of 7% from November through April.

As earnings season winds down, investors are looking forward to updates from companies such as Walt Disney, Wynn, MGM Resorts, and Occidental Petroleum.

Furthermore, market participants will closely monitor Federal Reserve Chair Jerome Powell, who is scheduled to speak on two occasions in the coming days. In the previous week, the central bank opted to keep rates unchanged for the second consecutive meeting, largely due to tumbling bond yields. Investors are eager to gauge whether the Fed’s rate-hiking campaign may be approaching its conclusion.

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