A continued shift in expectations toward a Federal Reserve rate cut at its December meeting supported upside in equities last week. The S&P 500 Index finished the week +3.7%, the Dow Jones Industrials +3.2%, and the NASDAQ 4.9%. The Communication Services, Consumer Discretionary, and Technology sectors led the S&P 500 Index, while the Energy, Consumer Staples, and Real Estate sectors lagged. The 10-year U.S. Treasury note yield was 4.019% at Friday’s close versus 4.063% the previous week.
The Federal Reserve’s Beige Book provided a view of current economic activity while the remainder of government-supplied economic data is playing catch-up. Overall U.S. economic activity was described as little changed across most of the country. The labor market was cited as showing signs of weakness with about half of the Fed’s districts reporting weaker labor demand.
Investor expectations have solidified around a December rate cut with CME Fed funds futures currently showing an 87.6% probability for a 0.25% reduction in the Fed funds target rate to a 3.50% to 3.75% range. In addition to a policy decision on interest rates at the meeting, Fed officials need to publish the quarterly Summary of Economic Projections, so agreement on a roadmap for 2026 will be a vital piece of the discussion. The first rate cut of 2026 is now seen in April versus March.
The earnings reporting season is almost complete with over 97% of companies in the S&P 500 Index having reported. This week has 10 companies in the S&P 500 Index scheduled to report results. Third quarter S&P 500 Index earnings growth is forecast at 13.4% with revenue growth of 8.5%. This is a large increase from the 8.0% earnings growth and 6.3% revenue growth for the quarter expected at the start of the earnings period last month. Full-year 2025 earnings are expected to grow by 12.2% with revenue growth of 6.6%.
In our Dissecting Headlines section, we look at the Holiday Shopping Forecast.
Financial Market Update
Dissecting Headlines: Holiday Shopping Forecast
Based on data from the National Retail Federation (NRF), this year’s retail sales in November and December are predicted to grow 3.7% to 4.2% year-over-year, for total spending of between $1.01 trillion to $1.02 trillion. Despite economic concerns, it appears shoppers have waited for better holiday sales and forecasted spending should still exceed 2024’s spending of $976.1 billion. Looking for sales is evident as 63% of consumers surveyed stating they planned to do most of their holiday shopping over this past Thanksgiving weekend, which is up from 59% in 2024.
According to Mastercard’s inaugural Shopper Snapshot, conducted with The Harris Poll, forecasted trends support similar sentiment that consumers are prioritizing big seasonal sales for their holiday shopping. In addition to finding deals, consumers have also become more discerning with 86% comparing prices across retailers, 84% reading product reviews, almost 50% shopping with credit cards that earn rewards, and 79% planning to cash in previously earned rewards for this year’s holiday shopping. Lastly, shoppers are embracing the use of AI as their personal shopping assistant as a tool for stress-free and time-saving shopping. While 40% of consumers state they already use AI to help shop, the majority includes 61% of Gen Z and 57% of millennial shoppers. The most popular uses for AI-assisted shopping are getting personalized product recommendations, confirming the best prices before purchasing, and summarizing numerous product reviews.
An early read on Black Friday spending from Adobe Analytics sees spending of $11.8 billion, +9.1% from Black Friday 2024. While some of that shopping was done online, Adobe is also forecasting an additional $14.2 billion in spending for today, Cyber Monday, a +6.3% increase year-over-year. Mastercard’s SpendingPulse index was up +4.1% on Black Friday, an acceleration from +3.4% last year. This included online shopping +10.4% and in-store +1.7%.