- The S&P 500® was up 8.92% in November, bringing its YTD return to 18.97%.
- The Dow Jones Industrial Average® rose 8.77% for the month and was up 8.46% YTD.
- The S&P MidCap 400® posted 8.33% for the month, bringing its YTD return to 5.48%.
- The S&P SmallCap 600® was up 7.98% in November and had a YTD return of 1.13%.
There were two turkeys served this November; one was on Thanksgiving, and the other for anyone who sold short for the month (similar to June and July). Then again, depending on their positions, the gains from shorts in the prior three months of losses (-8.61%) may have made up for November’s gain (8.92%, -0.46% net); as for the YTD 18.97% gain, maybe they had a (selected) short version of the “S&P 493.” As for the market’s meal, it was stuffed with enough economic stats to secure the end of interest rate increases (at least until the next recession), as Congress passed on passing a budget and postponed the next showdown (and potential shutdown) until Jan. 19, 2024 (with the second part set for Feb. 2), partially because it couldn’t decide on the bill’s stuffing. The economy continued onward, slowly, with some cracks (consumers were spending more, but buying fewer products) and concerns (debt cost, charge and auto loans, and real estate refinancing).
Consumers ended the month (and started the holiday season) better than expected, as estimates for online Black Friday shopping were a record USD 9.8 billion, and Cyber Monday sales were estimated to be a record USD 12 billion, with full Thanksgiving sales (cyber and stores for the five-day period) estimated at USD 38 billion. Of note, MasterCard data showed that online sales surged, while in-store shopping was less popular, as the average (according to Bankrate.com) interest rate for retail charge cards is 28.93%, compared with 21.19% for all credit cards (a long way from the Treasury, banks or yields). As for the rest of the holiday season, the initial indication is that stores are flinching first by increasing and extending discounts, as consumers are expected to selectively spend 3% more than they did in 2022, which, given higher prices, will translate into fewer actual products sold.
The S&P 500’s total return was up 20.80% YTD, which almost makes up for last year’s 18.11% total return decline (from the 2021 close it was -4.16% for stocks and -1.08% total return; the two-year Treasury at year-end 2021 was 0.73%). December has the best track record since 1928, up 72.6% of the time, with an average gain of 1.28% (I guess I should mention that December 2022 was down 5.90%), bringing high hopes for Santa to stick around, with a few brave bulls looking at the Jan. 3, 2022, closing high of 4,796.56, which is 4.77% away.
The index reversed its three months of declines (-2.20% in October, -4.87% in September and -1.77% in August; cumulatively -8.61%) after five consecutive months of gains (cumulatively 15.59%), as November posted gains for 16 of its 21 trading days, with 10 of the 11 sectors up and breadth turning strongly positive (431 up and 72 down, compared to last month’s 148 up and 355 down); trading increased 4% over October and was up down 18% over November 2022.
For Q3 2023 earnings to date, 490 issues, representing 98.3% of the index’s market value, have reported, with 391 beating their earnings estimates (79.8%) and 305 of 489 beating on sales (62.4%). Operating Q3 2023 EPS are expected to decrease 4.5% over Q2 2023 and be up 4.1% over Q3 2022; sales are expected to set a new record, estimated to be up 1.4% from the record Q2 2023 level and up 5.0% over Q3 2022. Operating margins for Q3 2023 are expected to decrease to 11.18% from 11.87% in Q2 2023 (the average since 1993 is 8.76%, and the record is 13.54% in Q2 2021). Significant EPS impact due to share count reduction for Q3 2023 was posted by 13.3% of issues to date, compared with Q2 2023's 16.3% and 21.2% in Q3 2022. For 2023, estimates call for an 8.8% increase, and the forward P/E is 21.2. For 2024, estimates call for a 13.5% increase (the same as 2023), and the forward P/E is 18.7.
The U.S. Treasury announced its quarterly schedule of offerings, as it will issue USD 112 billion in debt, which includes USD 9 billion in new financing (USD 48 billion in 3-year, USD 40 billion in 10-year and USD 24 billion in 30-year instruments). Treasury secretary Yellen met with Chinese Vice Premier He Lifeng on trade practices, as they tried to lay the ground for the Nov. 15 meeting between Biden and Xi Jinping in San Francisco.