Global Markets Weekly Wrap KW 50 : U.S. Stock Markets End Mixed Amid Growth Stock Optimism and Divergences

Global Markets Weekly Wrap KW 50 : U.S. Stock Markets End Mixed Amid Growth Stock Optimism and Divergences

U.S. stock markets witnessed a mixed performance throughout a dynamic week, as major indexes reflected contrasting trends. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all continued to climb to fresh record highs, a testament to the strength in growth stocks and investor optimism. In contrast, the Russell 2000 Index, which measures the performance of smaller-cap companies, experienced a decline following two weeks of notable outperformance compared to its large-cap counterparts. This divergence underscored the shifting dynamics in market capitalization preferences. When examining the Russell 1000 indexes, growth-oriented stocks exhibited a commanding lead over value shares, outperforming by a significant 5.53 percentage points, the widest margin observed since March 2023.

Sector-wise, performance was highly varied, reflecting a clear divide between growth and value-oriented areas. Consumer discretionary, communication services, and information technology stocks emerged as the leaders, each posting weekly gains exceeding 3%. These sectors have been fueled by robust corporate earnings and favorable macroeconomic trends that boosted investor confidence. Conversely, traditionally value-oriented segments, including energy, utilities, and materials, faced headwinds and declined by over 3% during the same period. This dichotomy highlighted the market's selective rotation, driven by investor sentiment and broader economic signals. The week was also marked by geopolitical developments, particularly in France and South Korea, but these events had minimal influence on the U.S. markets.

Economic data releases further enriched the narrative. Job market data took center stage, with much attention focused on Friday's nonfarm payroll report. According to the Labor Department, the U.S. economy added 227,000 jobs in November, a figure that slightly exceeded analysts' consensus forecasts. This marked a strong recovery from the subdued job growth in October, which had been affected by hurricanes in the southeastern United States and a significant strike at Boeing. Despite this rebound, the unemployment rate edged up to 4.2%. Stocks opened higher on Friday, as investors interpreted the robust job additions as a sign of resilience, all while assessing its implications for Federal Reserve policy at the upcoming December meeting.

Additional labor market data released earlier in the week provided further insights. The number of job openings in October rose to 7.74 million, up from September's revised figure of 7.37 million. Layoffs remained relatively stable, while the number of Americans voluntarily quitting their jobs—a metric often viewed as a sign of confidence in the labor market—increased to 3.3 million. Separately, payroll services provider ADP reported that private-sector employers added 146,000 jobs in November. Annual pay growth also accelerated, rising by 4.8% on a year-over-year basis. However, ADP's chief economist Nela Richardson noted that growth varied significantly across industries, with manufacturing, financial services, and leisure and hospitality showing relative weakness.

The Federal Reserve's December meeting remained a focal point for investors, as they sought clues on the trajectory of interest rate policy. On Monday, Federal Reserve Governor Christopher Waller hinted that despite recent data suggesting inflationary pressures might be stalling, he leaned toward supporting a rate cut, contingent on incoming data. Later in the week, Fed Chair Jerome Powell adopted a more cautious tone, emphasizing the economy's overall strength while signaling room for deliberation in monetary policy decisions. These remarks, combined with favorable economic data, strengthened market expectations for a 0.25 percentage point rate cut at the December meeting.

Bond markets mirrored the optimism in equities. U.S. Treasury yields declined across the curve, and bonds posted positive returns. Following the release of the employment report, Treasury yields fell further, driving up bond prices. Municipal bonds outperformed Treasuries in terms of total returns, benefiting from lower yields. Investment-grade corporate bonds also had a strong week, with roughly half of the new issuances being oversubscribed.

On a broader scale, European markets exhibited notable gains, with the pan-European STOXX Europe 600 Index rising by 2%. Key regional indexes such as Germany's DAX, Italy's FTSE MIB, and France's CAC 40 posted robust increases, while the UK's FTSE 100 lagged with a modest uptick. Political developments in France, including the collapse of Prime Minister Michel Barnier's minority government, created temporary jitters, though markets stabilized following assurances from President Emmanuel Macron. Germany, however, faced economic challenges, with industrial output contracting unexpectedly.

In Japan, stock markets advanced, supported by a weaker yen, which bolstered export-driven industries. The Nikkei 225 climbed 2.3%, while the broader TOPIX Index rose 1.7%. The Bank of Japan's monetary policy remained a topic of debate, with market participants divided over the timing of the next rate hike. Meanwhile, economic data revealed steady wage growth and mixed consumer spending trends.

China's markets rallied amid anticipation of additional stimulus measures. The Shanghai Composite gained 2.33%, while the blue-chip CSI 300 added 1.44%. Resilient manufacturing data fueled optimism, but concerns persisted over the property sector, where new home sales declined in November, reversing gains from October.

Other key developments included political uncertainty in South Korea following a brief imposition of martial law and impeachment proceedings against President Yoon Suk Yeol. In Poland, central bank officials maintained interest rates while signaling ongoing inflationary pressures. Globally, investors continued to grapple with evolving macroeconomic conditions, geopolitical risks, and central bank actions, all of which shaped the week's narrative across markets.