This week marks the first week of December, and the stock market did very well. November saw a lot of rises and falls as economic data became available that indicated the economy is not performing as well as expected. However, investors are more optimistic about the market this week as there is a likely interest rate decrease that will occur on the 10th, and Black Friday 2025 data seems very positive. Here is a summary of the performance of a lot of key indexes in the stock market this past week:
- S&P 500 Index – increased 0.85%
- Nasdaq Composite – increased 1.75%
- Dow Jones Industrial Average Index – increased 0.79%
- Russell 2000 Index – increased 1.58%
This shows that the stock market is performing quite well. A lot of this gain is because there is likely to be a federal rate cut announced on Wednesday. If this happens, the market will most likely rise slightly. This rate cut is likely to happen because inflation is rising very slowly, and it is still at relatively moderate levels. However, unemployment has gotten worse looking at the September job numbers. The Federal Reserve is more likely to see labor market issues as more concerning than inflation rates. This will lead them to lower the interest rate.
Almost all industries benefit from lower interest rates, but growth from rate cuts is often at the cost of higher inflation. With inflation still ticking up and the impacts of President Trump’s tariffs not fully seen yet, an interest rate cut may not be in the economy’s best interest. A new chair of the Federal Reserve is expected to be announced around the end of the year with the general consensus that Kevin Hassett will be nominated. Kevin Hassett will be far more likely than Jerome Powell to lower interest rates, so Powell may try to push to keep the rate stagnant until he is replaced in May 2026.
Industry Changes
Pharmaceuticals: The Pharmaceuticals industry, tracked using Dow Jones’ U.S. Pharmaceuticals Index (DJUSPR), decreased 3.67% this past week. Pharmaceuticals have been an industry that has consistently shown high returns despite lower investor confidence in the last few weeks. This industry is notably recession resistant so many investors have flocked to these stocks as market conditions became uncertain. As investors are more confident in the stock market this week, some investors may be moving to industries with higher potential returns. Additionally, the largest pharmaceutical stock in this industry is Eli Lilly which had a rough week due to lowering prices on some of their drugs. Investors do not typically like lowering prices because it could signal higher competition or weaker sales numbers. This stock drop is certainly not the only reason for the industry to drop, but, since it makes up a large part of the index, it certainly does not help the overall figures.
Financial Services: The Financial Services industry, tracked using Dow Jones’ U.S. Financial Services Index (DJUSFV), increased 1.6% last week. This is fairly on track with the rest of the market. The financial services market is hit very hard by recessions, so strong Black Friday spending definitely helped investors in this industry. Additionally, delinquency rates on all loans are at fairly low levels according to the Federal Reserve Bank at St. Louis. This is very good for this industry because despite slowly growing unemployment, loan repayments are still healthy.
Technology: The Technology industry, tracked using Dow Jones’ US Technology Index (DJUSTC), increased by 2.44% last week. The technology industry has been a high risk and high reward industry for some time now. There are a lot of companies within this industry that have grown rapidly in recent years, but that is not the case for all tech companies. This industry is up 28.41% year to date, and it is only positioned to grow faster as investor confidence rises. When times are good, investors tend to favor more risky stocks due to their on-average higher yields. An expected interest rate decrease next week and increased economic confidence has made this industry rise above market levels this past week.
Consumer Goods: The Consumer Goods industry, tracked using Dow Jones’ US Consumer Goods Index (DJUSNC), increased by 1.13% last week. Some of the biggest names in this industry such as Proctor and Gamble and Coca-Cola have declined this past week, yet the overall industry saw growth. This is likely because strong Black Friday sales have signaled that the consumer goods industry is still very important in the economy. A lowering of the federal interest rates will certainly help these companies as well, so the value of this industry has risen in anticipation of the rate cut as well.
Oil & Gas: The Oil & Gas industry, tracked using Dow Jones US Oil & Gas Index (DJUSEN), increased by 1.25% last week. This is likely because oil prices have risen over the last week. Increased domestic U.S. oil production has put domestic Oil & Gas producers in a good position to greatly increase profits if oil prices rise. Oil prices are likely rising due to increased tensions between the United States and Venezuela. Venezuela is a large oil producer, and a conflict between them and the United States may create global scarcity in oil. Scarcity will cause higher oil prices which will increase this industries profitability.
Parting Thoughts
The stock market did perform well last week, but a lot of this growth is in anticipation of the Federal Reserve cutting interest rates on the 10th of December. If this does not happen, the stock market will surely fall. It is unlikely that the Federal Reserve will keep rate stagnant due to worsening unemployment, but it is certainly not impossible. A bigger concern will be what Jerome Powell says about future rate cuts. If he signals that future rate cuts are unlikely, the stock market will not respond well to that information. Another big thing to be looking out for is the economic data for November being released by the Bureau of Labor Statistics later this month. Unemployment data is expected to be released on the 16th and Inflation data is likely on the 18th. These two metrics will show how the economy has been performing since September. If the data continues to worsen, stocks will be negatively impacted. These reports in the next few weeks will really show the direction the stock market and the entire economy is moving.
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