stock market

November CPI Could Upend December Rate Cut Expectations Traders in fed-funds futures currently place an 85% chance on the Federal Reserve cutting rates by 25 basis points at its December policy meeting. This level of confidence aligns with historical norms during the Fed’s “blackout” period, when officials refrain from public comments on monetary policy ahead of a meeting. As of Tuesday, market expectations for a December rate cut remain steady, supported by data from the CME FedWatch Tool. This optimism has fueled a strong stock market rally, with the S&P 500 and Nasdaq Composite reaching record highs last week and the Dow Jones Industrial Average crossing the 45,000 milestone for the first time. Inflation Data Looms as a Potential Game-Changer This week’s release of the November consumer price index (CPI) on Wednesday and producer price index (PPI) on Thursday could still shift market sentiment. Economists surveyed by The Wall Street Journal expect CPI to rise by 0.3% month-over-month for both headline and core readings. Year-over-year, headline inflation is forecasted to tick up to 2.7% from 2.6% in October, with core inflation steady at 3.3%. A sharper-than-expected increase in CPI—such as a 0.4% monthly gain—could raise questions about the Fed’s plans, said Jay Hatfield, CEO of Infrastructure Capital Advisors. However, most analysts see little likelihood of such an outcome, given policymakers’ confidence that inflation is on track toward the 2% target. Fed’s Gradual Approach and Market Sentiment Minutes from the Fed’s November meeting highlighted officials’ preference for a more measured pace of rate cuts, with Chair Jerome Powell emphasizing the importance of avoiding undue haste. Although a December rate cut appears likely, the Fed may strike a “hawkish” tone, signaling slower rate reductions in the future. Recent economic data has bolstered expectations for a December easing. November’s stronger-than-expected jobs report reinforced this view, and remarks from Fed officials, including Powell and Governor Christopher Waller, have not challenged the market’s outlook. Waller, in particular, indicated he supports a rate cut unless inflation data surprises significantly. The Role of the Dot Plot The December meeting will also include an updated Summary of Economic Projections, known as the dot plot, which outlines individual Fed officials’ rate forecasts. A projection showing only modest rate cuts in 2024 could help balance the more hawkish voices within the central bank, according to Hatfield. Key Takeaways With inflation data as the final major input before the December meeting, the market is poised for a rate cut. However, any significant surprise in the CPI could disrupt these expectations, underscoring the Fed’s delicate balancing act as it navigates its monetary policy path. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

The stock market is at record highs, but declining profit projections for S&P 500 companies suggest a potential pullback is on the horizon. Wall Street analysts have lowered their 2025 earnings per share (EPS) estimates by 0.5% over the past six months, dropping from $276 in June to $273, according to FactSet. Sales estimates also fell by 0.3% during the same period. The sharper decline in EPS versus sales indicates pressure on profit margins, as fixed costs limit companies’ ability to cut expenses in response to revenue drops. This trend extends across the S&P 500, excluding the “Magnificent Seven” tech giants—Nvidia, Microsoft, Amazon, Meta, Alphabet, Apple, and Tesla. These seven companies have largely resisted the downturn due to early gains from rising artificial intelligence investment. For the rest of the index, 2025 EPS estimates have fallen 5.5% this year, according to Citi. The energy and materials sectors have seen the largest cuts, with EPS forecasts down 18% and 6%, respectively. Oil prices have declined as global economic growth slows and production outside OPEC increases. Materials producers, including chemical and steel makers, are similarly affected by weaker demand tied to slowing economic activity. The consumer discretionary sector has also faced a 2.4% drop in earnings estimates, reflecting diminished consumer spending and broader economic challenges. While downward revisions are typical—historically averaging 6% for the next year’s estimates—this trend is more concerning against the backdrop of a softening economy. Signs of a slowdown include a weaker labor market, easing consumer spending, and persistently high interest rates. Although the Federal Reserve recently lowered rates, they remain far above the near-zero levels seen in 2021, continuing to weigh on growth. Even if earnings projections stabilize, current forecasts signal trouble for the stock market. Analysts note a strong correlation between earnings revisions and S&P 500 performance. With upward and downward revisions now evenly balanced, compared to a previous trend favoring upward adjustments, valuations appear stretched. At 22.5 times forward earnings, the S&P 500 is trading at its most expensive level in three years. A correction—a decline of 10% or more—seems increasingly likely. Morgan Stanley estimates that the S&P 500 could fall to around 5,300, a 16% drop from its current level of 6,095. However, the depth of any decline would depend on a specific catalyst, such as disappointing earnings from a major company, unexpected Federal Reserve policy changes, or economic setbacks. That said, market pullbacks rarely happen without warning. Investors should remain cautious, particularly with economic growth slowing and stock prices increasingly disconnected from earnings fundamentals. As Morgan Stanley’s chief U.S. equity strategist Mike Wilson points out, “There is room for modest valuation compression from current levels.” In summary, while the market remains elevated, the risk of a meaningful decline is growing. Prepare for potential volatility and don’t be caught off guard by a pullback. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

French Bond Yields Match Greek Levels Amid Political Turmoil Yields on French 10-year bonds have risen to levels comparable to those of Greece, signaling market concerns over France’s political and fiscal stability. On Tuesday, French bond yields reached 2.90%, just shy of the 2.92% yield on Greek bonds of the same maturity, according to FactSet. While still below the July peak of 3.28%, this marks a significant shift for a country long considered a pillar of European financial stability. The rise in borrowing costs comes as Prime Minister Michel Barnier’s government faces a no-confidence vote on Wednesday, threatening its survival just three months after taking office. Barnier’s administration was formed following President Emmanuel Macron’s call for snap elections aimed at curbing the influence of Marine Le Pen’s far-right National Rally party. However, political uncertainty has deepened, with questions mounting about France’s ability to stabilize its debt-to-GDP ratio, which stands at approximately 112%. France’s high level of foreign-held debt amplifies its vulnerability in the bond market. Robin Marshall, director of global investment research at FTSE Russell, highlighted that around 40% of French government debt is owned by overseas investors. “Foreign holdings are often quite volatile,” he noted, making France’s debt particularly sensitive to external market sentiment. Unlike other recent debt market disruptions, such as the U.K.’s gilt crisis under Liz Truss or the rise in U.S. yields tied to Donald Trump’s fiscal policies, France’s bond sell-off is rooted in political deadlock and austerity measures. The European Commission has already criticized France for excessive debt, and Barnier’s 2025 budget proposal, which includes tax increases and spending cuts, has failed to ease investor concerns. Strategists Thierry Wizman and Gareth Berry of Macquarie describe the situation as a referendum on political paralysis, warning that the uncertainty undermines confidence in France’s fiscal trajectory. “This raises doubts about whether France can ever stabilize its debt burden,” they noted. The bond market’s reaction underscores the influence of global creditors, who remain vigilant over fiscal policies. As borrowing costs rise, France’s political and financial challenges serve as a stark reminder of the importance of fiscal discipline in maintaining market confidence. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Stocks Signal Promising Returns as Volatility Falls and Late-Day Buying Surges: SentimenTrader Traders have been snapping up stocks during the final hour of trading over the past two weeks, coinciding with a sharp decline in the Cboe Volatility Index (VIX). These developments suggest favorable conditions for the stock market in the months ahead, according to Dean Christians, senior research analyst at SentimenTrader, in a recent note. The VIX Drops Below Key Levels The VIX, often called Wall Street’s “fear gauge,” tracks expected 30-day volatility for the S&P 500. On Friday, it closed below 14 for the first time in four months, following a retreat from summer highs above 20 during a market pullback. Historically, when the VIX falls below 14 after surging past 20, the S&P 500 has delivered strong medium- and long-term returns. According to SentimenTrader’s analysis of 26 similar past instances, the S&P 500 has risen a year later in 96% of cases, with a median gain of 14.2%. The sole exception was in 2015. Following comparable conditions in late 2023, the index rose 10% in three months. Late-Day Buying Indicates Confidence SentimenTrader’s last-hour trading indicator, which measures the cumulative direction of trading in the final hour, has surged in nine of the past 10 sessions. This pattern signals growing trader confidence and aligns with the “upward drift” often observed in rising markets. Historically, when the S&P 500 is within 2% of its all-time high and the last-hour indicator rises in nine of 10 sessions, the index has gained 90% of the time over the following six months. Over three months, the success rate drops slightly to 81%, but the indicator has delivered 14 consecutive gains since 1995. A Repeat of the 2016 Election Rally? The current market dynamics echo those following the 2016 presidential election. After a similar VIX decline and late-hour buying surge, stocks rallied into December before consolidating and resuming their upward trend. Strong Year for Stocks The S&P 500 ended November with a 5.7% monthly gain, its best performance of 2024, and has climbed nearly 27% year-to-date. The index closed at a record high on Friday, positioning it for further gains. Outlook Remains Bullish Christians highlighted that the combination of a declining VIX and robust late-hour buying activity signals a “constructive environment for stocks.” Despite normal fluctuations during uptrends, he noted that the current evidence strongly supports continued bullish momentum. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com