RJ Hamster
Zacks Investment Research
Profit from the Pros
By Kevin Matras
Executive Vice President
Stocks Closed Higher Yesterday, Small-Caps Make New All-Time High Close
Stocks closed mostly higher yesterday with only the Dow missing the mark, albeit only slightly by -0.07%. The gainers were led, once again, by the small-cap Russell 2000 index, which added 0.76% and making a new all-time high close.
YTD, the Dow is up 12.5%, the S&P is up 16.6%, the Nasdaq is up 21.7%, and the Russell is up 13.5%.
Yesterday’s Challenger Job-Cut report showed just 71,321 announced corporate layoffs last month. That’s down from October’s 153,064.
In spite of the lesser amount last month, the Challenger report also noted that there have been as many as 1.17 million announced layoffs this year, a 54% increase over last year at this time, and the most since 2020.
Ironically, Weekly Jobless Claims fell -27,000 to 191,000 vs. last month’s 218,000 and views for 225,000. That was the lowest amount in more than 3 years.
Although both numbers were probably impacted by the holidays as layoffs around holidays are considered bad practice.
Today, we’re supposed to get the Personal Consumption Expenditures (PCE) index (which is the Fed’s preferred inflation gauge). Some sites suggest it will be delayed. But the Bureau of Economic Analysis (BEA), who produces the report, indicates it will be released today. If so, it should come out at 10:00 AM ET.
We are also expected to get Factory Orders and Consumer Sentiment.
In other news yesterday, Dollar General reported before the open and posted a positive EPS surprise of 39.1%, and a positive sales surprise of 0.33%. That translated to a quarterly EPS growth rate of 43.8% vs. this time last year, and a sales growth of 4.62%. They also raised full-year earnings guidance by more than 3% above the consensus. Shares soared by 14.01% yesterday.
After the close we heard from Ulta Beauty, which posted a positive EPS surprise of 12.7%, and a positive sales surprise of 4.95%. That equated to a flat quarterly EPS growth rate, but a sales growth of 13.0%. They also raised their full-year sales guidance by more than 2% above their previous outlook, and raised their earnings guidance by 5.27% above their previous forecast. They were off -1.94% in the regular session before earnings, but were up by 6.50% in after-hours following earnings.
Investors will be looking forward to next week’s FOMC Announcement. According to the CME’s FedWatch tool, the odds are at 87.0% for a 25 basis point cut.
What investors will really be focused on, however, is what the Fed’s outlook is for rate cuts next year.
December is off to a good start. And we only need another 3.4% increase in the S&P for my forecast of another 20% gain this year to come to fruition.
As you know, I’m likening the current AI boom to the dot-com boom of 1995-1999, when we saw 5 years in a row of 20%+ gains. Back then the S&P was up 34.1%, 20.3%, 31.0%, 26.7%, and 19.5% (I’m rounding up that last year).
So far, we saw 2 years in a row of 20%+ gains (2023 was up 24.2%, and 2024 was up 23.3%). Currently, it’s up 16.6%. But who’s to say it can’t be up 25% or 30% or more this year? Either way, I’m expecting solid gains this year, and for the next 2 years after this, if not more.
And with Q4 being the best quarter for stocks, not to mention a 77.8% likelihood of being up in December, the odds are looking good for an end of year rally.
Best,
Kevin Matras
Executive Vice President, Zacks Investment Research
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