Stocks Extend Gain As It Heads For Its Best Week Since June

2:33 pm Friday, November 11th, 2022

The momentum of yesterday’s huge rally has subsided some but it has not disappeared. The major indices remain in good form for the most part, underpinned by continued weakness in the dollar, continued strength in the mega-cap stocks, a continued belief that inflation has peaked and that the Fed is apt to take a less aggressive rate-hike approach in coming months, and a Bloomberg report that China has relaxed its quarantine guidelines for inbound travelers.

Accordingly, selling efforts have been contained today and have been limited primarily to the more defensive-oriented areas of the market. That would include the health care (-2.4%), utilities (-1.9%), and consumer staples (-1.2%) sectors, which are falling prone to a rotation back into beaten-up growth stocks.

The huge drop in market rates yesterday has helped drive that rotation. The Treasury market, however, isn’t directly involved in today’s market action. It is closed in observance of Veterans Day.

The weakness in the aforementioned sectors has disproportionately weighed on the Dow Jones industrial Average. It has been a laggard throughout today’s session, feeling the weight of losses in stocks like UnitedHealth (UNH), Johnson & Johnson (JNJ), and Procter & Gamble (PG).

Conversely, the continued strength in stocks like Amazon.com (AMZN), Microsoft (MSFT), Alphabet (GOOG), and Apple (AAPL) has been an influential source of support for the broader market along with strength in the energy stocks. The latter have benefited from rising oil prices and the thinking that China could see better relative growth in coming months as it extricates itself from its economically-damaging zero-COVID policy.

Separately, the lone economic release today was the preliminary November University of Michigan Index of Consumer Sentiment. It was weaker than expected at 54.7 (Briefing.com consensus 59.6) and down from 59.9 in October, although the year-ahead and five-year inflation expectations edged higher to 5.1% and 3.0%, respectively, from 5.0% and 2.9%.

The U.S. Dollar Index is down 1.5% to 106.57, leaving it down 3.9% for the week.