Market Momentum: Stocks Rally as Holiday Season Beckons, S&P and Nasdaq Shine Bright

Stocks are surging in anticipation of the holidays, S&P and Nasdaq post strong gains, setting a positive tone. Where next?

• Stocks are surging in anticipation of the holidays, S&P and Nasdaq post strong gains, setting a positive tone.
• The economic focus is on the CPI and a looming government shutdown; Market confidence in a non-issue is reflected in VIX.
• The retail earnings spotlight is shining on Home Depot, Target, Macy's and Walmart; Marvel film has disappointed investors and they’re anticipating the China-U.S. summit.

Stocks are concluding two robust weeks of gains as the holiday season approaches, historically a favorable period for the market. The S&P 500 has shown resilience, marking gains in nine of the last ten sessions, surging over 7% in the past couple of weeks alone. Year-to-date, the S&P boasts an impressive 15% increase. The Nasdaq Composite has mirrored this success, with gains in eight of the last 10 sessions, resulting in a 9% surge over two weeks and an impressive year-to-date return of 32%. With earnings season winding down, attention now turns to forthcoming economic data releases and the final Federal Reserve meeting before the year concludes.

This week is marked by a flurry of economic data, starting with tomorrow's Consumer Price Index (CPI) report. Expectations are set for a 0.1% month-over-month increase and a 3.3% year-over-year rise in consumer prices. Core CPI, excluding food and energy prices, is anticipated to show a 0.3% month-over-month increase and a 4.1% year-over-year climb. As of now, there's an 86% probability, according to the CME, that the Fed will maintain interest rates in the upcoming meeting. While a robust report could alter this stance, a weaker-than-expected one is unlikely to prompt a rate cut.

Simultaneously, the government faces a Friday deadline to pass a spending bill. House Speaker Mike Johnson is expected to propose a continuing resolution bill, providing Congress the opportunity to negotiate individual spending bills. Moody's has issued a warning of a potential downgrade to the United States credit rating if a bill isn't passed by Friday, echoing a move previously undertaken by Fitch Rating earlier this year. The VIX, a volatility index, suggests the market views this as a non-issue, providing insights into market sentiment.

Retailers’ earnings reports

In the realm of earnings, major names have largely reported, but the focus this week shifts to a wave of retail companies. Home Depot (HD) is set to report before the market opens tomorrow morning, followed by Target (TGT) on Wednesday morning. Later in the week, Macy's (M) and Walmart (WMT) will also unveil their earnings. The week will also feature a glimpse of October retail sales. Additionally, Applied Materials (AMAT) is scheduled to report on Thursday after the market closes.

In other news, the latest Marvel film, “The Marvels,” debuted over the weekend with disappointing results, raking in just $47 million in U.S. sales—the weakest debut of any Marvel film. President Biden and Chinese President Xi Jinping are expected to meet at a summit in San Francisco this week, fostering hopes for a breakthrough that could pave the way for Boeing (BA) to re-enter the Chinese market with its 737 Max, ending a commercial freeze. Boeing has also finalized a $52 billion deal to sell a double-digit number of 777X widebody models to Emirates, one of two flag carriers of the United Arab Emirates.

The week ahead

Looking ahead, the S&P 500 SPY ETF Trust is expected to have a move of over 5 points up or down for the week, while the Nasdaq 100 QQQ ETF Trust is anticipated to see a move of almost 6.5 points. With economic data, earnings reports and the specter of a possible government shutdown, the week may witness increased market activity compared to the previous week. As always, adhering to your investing strategy and long-term plans is prudent in navigating these dynamic markets.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan