Holiday-Shortened Week; Bitcoin Flirting With $100K

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Key Takeaways

• Small Caps Surge 5%, Leading Broad Market Gains Last Week
• Earnings Forecast Up 5.8%, With Forward P/E Ratio High
• Light Trading Week Ahead With Key Data And Earnings Reports

Stocks posted strong gains last week with small cap stocks again leading the way. The Russell 2000 jumped nearly 5%. That was followed by a 2% gain in the Dow Jones Industrial Average. The Nasdaq Composite was up 1.7% while the S&P 500 posted a 1.5% increase.

Earnings season is quickly winding down. Based on a combination of companies which have reported and the few who have yet to report, overall earnings are forecast to be up 5.8% for the third quarter on a year-over-year basis, according to FactSet. With the S&P 500 closing at 5969 last Friday, that would put the 12-month forward-looking P/E ratio at 22, which is about where it has been throughout this earnings cycle. On a historical basis, that is pretty high. The 5-year average is 19.6 and the 10-year average is 18.1.

Given the fundamental extreme at which stocks appear to be trading, I expect markets to pivot their attention almost exclusively toward the incoming Trump Administration's economic policies. It may be along those lines, and Trump's pick for Treasury Secretary, Scott Bessent, that we're seeing treasury yields fall along with the dollar. Bessent, who was dubbed a "business as usual" pick by Elon Musk, is seen as being less aggressive on tariffs. Having that moderating force at the table is being perceived as a positive for markets.

Taking a look at some individual stocks, Macy's, who was scheduled to release earnings Tuesday before the open, made a preliminary release this morning and said their full quarterly release will be delayed because of an accounting issue. Third quarter sales were down 2.4% and same store sale were also down by 1.3%. The company expects to post full quarter earnings by December 11th. Shares of Intel are trading lower this morning in premarket following a story in The New York Times saying the company could get less funding that initially expected as a part of the CHIPS Act. Snowflake is trading higher by 3.5% in premarket following an analyst upgrade and finally, Bath & Body Works is higher by nearly 14% in premarket after reporting strong earnings and raising guidance.

With Thanksgiving just a few days away, this could prove a quiet week. Having said that, there is still a fair amount of data worth watching. On the earnings front, Abercrombie and Fitch, Best Buy, Dick's Sporting Goods and Kohl's will all report before the open tomorrow. Then after the close, Dell and Nordstrom both report. That will be followed on Wednesday as the latest report on inflation, the Personal Consumption Expenditures, is due out before the open. Wednesday afternoon, the minutes from the most recent Federal Reserve Open Market Committee (FOMC) meeting will be released and it will be interesting to see what Fed members discussed. We've already heard Jerome Powell pull back a bit on the need for interest rate cuts and I'm curious what other Fed members had to say.

Looking forward to this week, I expect it to be a front-loaded week, meaning I expect activity to slow as we move toward Thursday. Markets will be open Monday, Tuesday and Wednesday for the full trading session, but will be closed Thursday and only open for half a day on Friday. Weeks such as this, where volume can be light, can also be choppy. It's also a time when a story which might not normally get attention, gets attention.

For today, I'm keeping an eye on crypto. Bitcoin, which has been flirting with $100 thousand of late, is helping to propel crypto-related stocks higher. Coinbase, MARA Holdings, and others are all higher in premarket. I'm also keeping an eye on interest rates. After having rallied since before the election, I'm curious to see if rates keep falling following the nomination of Bessent. As always, I would stick with your investing plans and long-term objectives.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.

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JJ Kinahan is the Chicago-based CEO of IG North America, the parent company of market-leading brokerage tastytrade, financial education content network tastylive,

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