Market Insights

Stock picking could be making a comeback as volatility falls and attention shifts from interest rates to individual growth stories.

The S&P 500 rose 1 percent between Friday, November 29, and Friday, December 6. It was the third straight positive week, establishing a new record high near 6,100.

While cyclicals like industrials and financials were strong after Donald Trump won reelection in November, growth stocks regained leadership last week. Some of the big gainers were megacaps like Tesla (TSLA), Amazon.com (AMZN) and Meta Platforms (META). However smaller names like Palantir Technologies (PLTR), Docusign (DOCU) and Marvell Technology (MRVL) also surged.

That kind of price action seems to resemble trends in 2020 and 2021 before investors worried about inflation and interest rates. It could also remind some people of the environment in the late 1990s when the Federal Reserve hiked rates to slow inflation, made a few cuts and then did little as a historic bull market took shape.

“We are at or near the point where it makes sense to slow the pace of rate reductions,” Cleveland Fed President Beth Hammack said on Friday. She cited stronger-than expected “inflation, growth and […] the labor market.” She also made comparisons to the 1990s, calling the Fed’s limited rate cuts then “a relatively successful precedent for helping to sustain a long expansion.”

Most economic data was uneventful last week. Non-farm payrolls and hourly wages rebounded more than expected but initial jobless claims were higher than feared. The Institute for Supply Management’s manufacturing index showed an uptick in new orders following months of weakness. Services, however, missed for the first time since July.

S&P Technology Select Sector Index, weekly chart, showing key levels and patterns.

Nasdaq Breaks Out

Consumer discretionaries rose the most last week, powered by TSLA and AMZN. Technology and communications also outperformed the S&P 500. (Those three sectors are most associated with growth investing.) That helped push the Nasdaq-100 to a new record closing high for only its second time since July. A key technology index also broke out. (See below.)

In another potentially interesting development, Cathie Wood’s ARK Innovation ETF (ARKK) rallied to its highest level in more than two years. ARKK focuses on long-term growth companies mostly spanning software, services and e-commerce. Its main holdings include TSLA, Coinbase (COIN) and Roku (ROKU).

Speaking of ROKU, the streaming-video company had its biggest weekly gain in more than a year after Needham said its growth potential was underappreciated. COIN also surged as Bitcoin crossed $100,000 for the first time. Other ARKK holdings like Roblox (RBLX), PLTR and Robinhood Markets (HOOD) also hit new 52-week highs.

ARK Innovation ETF (ARK), weekly chart showing long-term levels.

In contrast, financials and industrials lagged. Small caps fell. Energy was the worst-performing sector overall after OPEC+ delayed increasing oil production. While that may sound positive on the surface, it highlighted weak demand and rising supply.

Overall, the price action was consistent with a shift away from value stocks and cyclicals in favor of growth.

Super Micro Bounces Again

Super Micro Computer (SMCI) jumped last week after announcing an internal review found no financial wrongdoing. The AI-server maker also received a listing extension from the Nasdaq, helping calm fears of alleged accounting irregularities. It was the second time in the last three weeks that SMCI had the biggest gain in the S&P 500 index.

Lululemon Athletica (LULU) had its best week in eight years after reporting better-than-expected earnings and revenue. Strength in overseas markets like China helped drive the beat.

HP Enterprise (HPE) shot to record territory as demand for servers and AI systems pushed quarterly results ahead of expectations.

TSLA rose to its highest level in almost three years as analysts cheered CEO Elon Musk’s ties with President Elect Trump. Attention is increasingly focused on the potential for robotaxis starting next year.

AMZN jumped to new record highs and had its biggest weekly gain in almost two years after releasing new AI tools at its annual AWS conference. The programs will help automate content generation.

Speaking of AI, Salesforce (CRM) jumped to new record highs after customers embraced Agentforce. The service, launched in September, lets companies build programs with advanced reasoning that can adjust to changing business data.

Workday (WDAY) and and Apollo Global Management (APO) also jumped on Friday afternoon following news they will join the S&P 500 on December 23.

S&P 500, daily chart, with key indicators.

Charting the Market

The S&P 500 has steadily advanced since mid-November, gaining in 12 of the last 14 sessions.

Most indicators on the index appear bullish, with faster-moving averages above the slower moving averages. Wilder’s Relative Strength Index (RSI) reached an overbought condition for the first time in five months. Moving average convergence/divergence (MACD) is also rising. Those patterns are potentially consistent with positive momentum.

Cboe’s volatility index (VIX) ended last week at its lowest level since early July. The yield on the 10-year Treasury note also remained below its April peak. Those points could also support risk appetite.

In addition, the S&P Technology Select Sector Index jumped to its highest level since July. That could be important because its holdings represent nearly one-third of the S&P 500.

The Week Ahead

This week brings a few important economic numbers and earnings reports. Wednesday’s inflation reading could be the most noteworthy.

The main items today are quarterly results from Oracle (ORCL), MongoDB (MDB) and C3.ai (AI) after the closing bell.

Tomorrow features the Goldman Sachs U.S. Financial Services Conference, which could impact some companies in the sector.

The consumer price index (CPI) for November is at 8:30 a.m. ET on Wednesday. Crude-oil inventories are due later in the morning.

Thursday brings the producer price index (PPI), initial jobless claims and a European Central Bank meeting. Broadcom (AVGO) and Costco (COST) report earnings after the close.

Standardized Performances for ETF mentioned above

Performance data shown reflects past performance and is no guarantee of future performance. The information provided is not meant to predict or project the performance of a specific investment or investment strategy and current performance may be lower or higher than the performance data shown. Accordingly, this information should not be relied upon when making an investment decision. 

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