Shesa's weekend stock market updates - 12|7|25

Welcome to my weekend updates

December has not been phenomenal but not bad so far. Nasdaq is up 0.9% and S&P 500 is up 0.31%. But the star has been the Small Cap index - Russell 2000 which is up 2.28% so far this year. I will discuss later why we saw some positive move on the market later. Netflix announced a $72B deal to acquire Warner Bros. film/TV studios and HBO Max, pending regulatory approval. Last week, S&P 500 was +0.3%, Nasdaq: +0.9% and Dow: +0.5%. Small-caps (Russell 2000) was up +1.5% last week.

Next week's key Earnings

• Oracle (ORCL) on Wednesday,  12/10 after COB
• Broadcom (AVGO) on Thursday, 10/11 after COB 

I will keep a close eye on both of the above earnings. I am optimistic about AVGO earnings but little apprehensive about ORCL due to its debt situation and future booking. But I will be thrilled if it surprises. 

Economic Report this week

WED, 12/10: FOMC decision on Interest Rate

Federal Reserver Rate Cut POLL

I conducted a poll in why WhatsApp investment group. The members overwhelmingly (80%) voted for a FED 0.25% rate cuts. I totally agree with this voting. Here are the reasons why I believe FED should cut rates. 

• The labor market has been cooling for last few months amid slowing job gains and rising unemployment risks.
• The November Nonfarm Payroll was up 119,000 vs. 50,000 expected but the unemployment rate remained at 4.4%. 
• ADP Employment: Came at -32,000 vs expected +10,000.
• Inflation: The CPI has ben cooling 3% vs. 3.1% expected.
• Producer Price Index (PPI) has been cooling, 2.7% vs Expected 2.7% but Core PPI was only 2.6% vs 2.8%.
• Consumer sentiment: Down to 51 vs. 53.2 expected.

All the above factors should force FED to cut rate on Dec 10 to 3.5-3.75% from current 3.75 - 4%. This has boosted stocks modestly, particularly small cap index has done much better. 

Today, I saw an interesting comment from Fed treasury secretary Bessent. Here is what he said on a X post "The Fed is turning into universal basic income for PhD economists. I don't know what they do. They're never right … If air traffic controllers did this, no one would get in an airplane.”. Honestly, I do not disagree on this...

Stocks to watch

AVGO, ORCL, TSLA, NVDA, GOOG, META, HOOD, CVNA, APLD, SOXL, TQQQ, RXRX

Note: Carvana (CVNA) was added to S&P 500 after the close of market on Friday and the stock was up about 10% Friday after hours.

What to expect for the stock market? 

Unless Fed chair J Powell gives any hawkish statements to spoil, we should see a Santa Claus rally amid the rate cuts and holiday sentiment. Investors may remain cautions before the FOMC decision on Wednesday, but depending on rate cut and FED statement, the market should take the course. The Fed also stopped the Quantitive Tightening (QT) starting December 1 which is a positive news for the stock market as it should increase liquidity (availability of funds). Please note that FED was selling about $50B worth of treasuries and Mortgage Based Security (MBS).  In addition, ORCL and AVGO results, if good, it should boost AI sentiment. Either way, I anticipate some year end rally going to early next year.

Have a good rest of the weekend!