Thanksgiving Market Update

It’s Thanksgiving, which often prompts the familiar question: “Hey, how are your investments doing?” This year, though, stock traders are not just answering with a sigh; they’re entering the holiday season with profits and a sense of optimism that’s been rare lately.

The major US indexes have just reached new highs, marking four consecutive days of gains. The Nasdaq Composite is on track for its best Thanksgiving week since 2008—can you believe that? Last time it was this robust, we were still figuring out what smartphones actually were.

There are two key factors at play this year:

• Dovish stance from the Federal Reserve
• AI trading keeping investors active

Let’s delve into what’s fueling this seasonal surge.

AI’s Unease

For the past month, concerns about AI stocks inflating like balloons in a Thanksgiving parade had been swirling. However, this week, those anxieties seem to have faded.

Companies like Microsoft, CoreWeave, and Dell, alongside the recent revival of AI-related stocks, have found a stable footing. The Nasdaq rose by 0.8% on Wednesday, outperforming other indexes, and reminding everyone that tech still leads the market.

So, what’s changed?

• No new scandals or bubble fears concerning AI
• No unexpected shifts in spending (thanks to Meta for that)
• No sensational stories predicting doom
• Strong guidance on data centers in recent earnings

Nvidia, despite being under close watch, saw a 1.4% rebound on Wednesday. Still, its stock is significantly lower than its peak earlier this month.

It seems like investors are switching out AI winners, but the trading activity is still strong. Just because some shakeouts are occurring doesn’t mean it’s over.

Sectors on the Rise

Almost every sector in the S&P 500 gained on Wednesday, pushing the broader index up by 0.7%. The Dow also rose significantly, by 315 points, making it one of the best Thanksgiving weeks for both indexes since 2012. Even defensive sectors like utilities and consumer staples are gaining ground, indicating a shift in market sentiment.

The Fed’s Quiet Preparations

Just a week ago, the odds of a December rate cut were about 50/50. Now, that probability has surged to over 80%. What does this mean for traders?

• Lower borrowing costs
• Improved ratings
• More relaxed financial situations
• Fewer risks in the months ahead

Nothing quite sets a festive mood like the prospect of a rate cut.

Remember, this week is shortened since the market is closed on Thursday and has an early closing on Friday. With less trading time available, investors often react ahead of time, and this week, it seems to lean towards optimism.

Nvidia’s Return

Even though Nvidia’s stock is still below its earlier highs, Wednesday’s movement shows it remains a key player. Companies like Meta and Google have gained traction, as traders diversify their investments in AI.

Nvidia may not be the leading force behind this week’s rally (spoiler: that’s actually Google), but its ability to stay afloat has helped maintain stability in tech stocks.

Wrap-Up

If you were expecting a calm start to the holiday season, the market had different ideas. Here’s the status:

• A four-day winning streak
• A resurgence in big tech
• Broad sector participation
• Shifting expectations around interest rates

So what do you think? Will this momentum last into December? Will AI stocks continue growing, or will there be a pullback influenced by inflation, interest rate decisions, and job reports? Share your thoughts, and enjoy your Thanksgiving!