Michael Reinking:
Hello, I'm Michael Reinking, Senior Market Strategist at the New York Stock Exchange and this is Market Storylines. Every week, we are here to keep you up to date on the key trends and events driving global markets. It is a holiday shortened week and while turkey and football are front of mind, there have been no shortage of headlines to digest. So let's get right to it as we record on Thanksgiving Eve, here are this week's Market Storylines.
Now, last week, US indices rallied, recouping most of the previous week's loses, once again closing just below all-time highs. A round of solid corporate earnings and economic data helped to repair sentiment after some controversial appointments to the Trump cabinet. Now, late in the week, equities extended to the upside after Matt Gaetz withdrew his nomination for AG, which removed the potentially divisive distraction of a long-drawn-out approval process, freeing up energy to continue along the post-election process in Washington.
Now not surprisingly, the biggest headlines this week have once again come out of the Capitol, and using Trump's 1.0 as a guide, that is a dynamic that will likely be with us for the next four years. Now, the headline that had the most impact on markets actually came last Friday after the close when President Trump announced that global macro hedge fund manager Scott Bessent would become Treasury secretary. Now, this was well received by investors with both equities and treasuries rallying on Monday. Now Mr. Bessent is viewed as a fiscal hawk with his 3-3-3 policy of cutting deficits to 3% of GDP from around 7% at this point. 3% GDP growth fostered in by a business-friendly and deregulatory environment. And in increasing domestic oil production by 3 million barrels a day, from around 13 million currently. Now he's viewed as pragmatic with the markets hoping he will be a voice of moderation within the administration.
Now, I would imagine his nomination will move through the Senate reasonably easy and he has said his first order of business is to follow through on tax cut pledges. Now, this goes to a big topic of conversation for the administration around sequencing, starting with the more positive sides of the agenda to help growth before starting to layer on tariffs. However, we didn't have to wait long to hear about those from President Trump who chimed in after the close on Monday. Now, the president said once he does take office, he would increase tariffs on goods from Canada and Mexico by around 25%, pointing to border security concerns. Now, he also said he would increase tariffs on goods coming from China by an additional 10%. Now, broadly, markets have taken those headlines in stride as this was viewed as an opening salvo to negotiations or the implementation of a strategy that Scott Bessent himself has talked about, escalate to deescalate.
However, this did impact currency markets, other global indices and definitely weighed on companies and sectors that are exposed. Including autos, pockets of retail, liquor companies, and semiconductors with concerns around the impact on component costs, supply chains, and product demand, and even the potential for retaliation. Now, the ICE Semiconductor Index is one of the worst performing this week, down about 3%. And broadly, tech has been under some pressure, driven by some mixed earnings, rotational activity and concerns that the regulatory backdrop may remain difficult for the large tech companies given the names being floated for top seats at regulatory bodies. However, despite some weakness today, most major indices are higher for the week, continuing to trade right around the all-time highs, including the Russell 2000, which hit its first new all-time high since 2021. Now, this week's calendar has been compressed, given the holiday, and there was a data dump this morning.
Most of that data was largely in line with expectations. Initial claims remained at pretty low levels, while continuing claims have been moving higher, now around 1.9 million. Now, GDP was unrevised at 2.8% and after the open, PCE was also in line with expectations but did tick up from the prior month. However, the most positive number today was the increase in personal income, which came in at twice the estimate at 0.6% while consumer spending was also above estimates. Now, the personal savings rate as a percentage of disposable income increased to 4.4% from 4.1% in the prior month, which does suggest that the consumer may be in a better place than previously thought. Which brings us to an important topic this time of year and the lighter portion of today's episode, the holiday shopping season. And maybe even some of you are listening while you are doing some Black Friday shopping.
Now, I've seen a range of estimates for holiday sales this year. Most are looking for sales to be up between 2% to 4% from last year's numbers, with the estimates from NYC listed Mastercard and Visa near the upper end of that range. Now, over the last couple of weeks, retail earnings have been a focal point in markets and have been a mixed bag so far. The top line results haven't been particularly strong. The focus on operational efficiency over the last few quarters has helped margins and the bottom line. Now, there have definitely been some big misses driven by some operational missteps and a difficult macro backdrop.However, I'd say the overall commentary about the holiday shopping season has remained cautiously optimistic. Now, management teams have pointed to a value-oriented, deal seeking consumer, which may make this a more promotional holiday season than what we've seen recently.
So that's going to do it for this week. Once again, thank you for spending some time with us today. I wish you luck on your hunt for those holiday shopping treasures. Remember, you can watch Market Storylines on tv.nyc.com or our YouTube channel, or you can listen every Friday on the Inside the ICE House podcast feed. Thanks for joining me. I'm Michael Reinking. I'll talk to you again next week.
Speaker 2:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X @ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week, Inside the ICE House.
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