Stocks Up Sharply On Friday, And Up For The Week  Image: Bigstock Stocks closed sharply higher on Friday, and higher for the week. That makes it two weeks in a row for the Dow, S&P, and Nasdaq. But the small-cap Russell 2000, and the mid-cap S&P 400 weren't as lucky. They were up on Friday. But they finished down for the week. But they are all up from their correction lows just a couple short weeks ago. The Dow is up 5.75%, the S&P is up 7.23%, and the Nasdaq is up 9.55%. Even the small-caps and mid-caps are up 4.18% and 4.85% respectively. Stocks sank last Thursday, following a speech by Fed Chair Jerome Powell, where he said that he was "not confident" the Fed has done enough to bring inflation down. But as we wrote later that day, the pullback following his comments simply looked like a good opportunity to pull some profits after a sharp rally the preceding week. And on Friday, traders brushed off Powell's comments and surged higher. The only economic report that came out on Friday was the Consumer Sentiment report. That index slipped to 60.4 vs. last month's 63.8 and views for 63.5. That report also includes the year-ahead inflation expectations, and that came in at 4.4% vs. last month's 4.2% pace.
This week we'll get more news on inflation with the Consumer Price Index (CPI) on Tuesday, 11/14, and the Producer Price Index (PPI) on Wednesday, 11/15. Both retail inflation (CPI) and wholesale inflation (PPI) have come down significantly from last year's highs. The decline has slowed a bit. And there have been a couple of modest upticks here and there. But by and large, inflation is on the decline. The Fed has acknowledged it will take some time for inflation to get back down to 2%. But the faster inflation ticks down and heads toward that level, the sooner the Fed can officially call their rate hike cycle finished.
Either way, much of that depends on inflation. And this week we'll get 2 important inflation reports. Earnings season continues this week. While it's winding down, there are still some big names in queue to report, including Home Depot and Tencent on Tuesday, 11/14; Cisco and Target on Wednesday, 11/15; and Alibaba and Applied Materials on Thursday, 11/16. (And looking out to next week, we'll get the semiconductor giant NVIDIA on Tuesday, 11/21.) After the close on Friday, it was reported that Moody's cut its ratings outlook on the U.S. government to negative from stable. Although, they maintained and affirmed the U.S. rating of Aaa. Moody's said, "In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues," ... they expect that "the U.S.' fiscal deficits will remain very large, significantly weakening debt affordability." They went on to say "Continued political polarization within U.S. Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability." This should come as a timely warning to Congress, given that the new deadline for a funding package comes at the stroke of midnight on Friday, November 17. In the meantime, stocks will attempt to add to their recent gains and finish the year out strong. The Q4 rally was a bit late in getting started. But it's been rallying in earnest. And if the current strength persists, there's no reason why we couldn't make new highs for the year before 2023 comes to a close. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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