Stocks Back in Rally Mode in Best Week of 2015

All it took was a little more certainty for stocks to log their best week this year.
By Keris Alison Lahiff ,

All it took was a little more certainty for stocks to log their best week in more than a year. 

The Federal Reserve provided that comfort by signaling even more strongly that a December rate hike is now likely. And instead of freaking the markets out, investors were relieved at the chance to plan ahead after months of not knowing when the central bank will finally make its move. 

"Domestic stocks [extended] the week's rally, with the global markets coming to terms with the increased likelihood of a December Fed rate hike," said Nathan Peterson, senior derivatives analyst at Schwab Center for Financial Research. 

The Dow Jones Industrial Average added 3.4% over the week, regaining positive ground for the year in Friday's session. The S&P 500 added 3.3%, and the Nasdaq gained 3.6%. The S&P 500 logged its best week of the year.

"Along with the plethora of FOMC speakers we have heard from over the past couple of weeks and the outstanding October employment report, [the October] FOMC minutes all but confirmed a December hike," BNP Paribas analysts wrote in a note. 

The Fed has "done everything [it] can to avoid surprising the markets and governments" ahead of an inevitable move off of crises-level interest rates, Fed Vice Chairman Stanley Fischer said in a speech in San Francisco. Fischer also reiterated that the central bank has not made a decision yet as to whether it will make its move in December, and said the Fed will continue to assess the data. Markets are currently pricing in an approximate two-in-three chance of a December hike.

Inflation will likely move up to its 2% target rate soon, St. Louis Fed President James Bullard said on Friday. Bullard, a voting member on the Federal Open Market Committee in 2016, said the Fed's inflation target will likely be met by the end of next year if oil prices stabilize and other prices continue to increase.

The Fed still has a number of data points before its mid-December meeting, including the November jobs report. However, some analysts argue that for the most part, coming data will matter less to markets than it has over the past month or so. 

"With such clear communication from the Fed, data in the coming weeks will begin to garner less attention," BNP Paribas analysts argued.  "Without a shock to present significant downside risks to the Fed's outlook, the FOMC will begin normalisation next month."

Data will be front-loaded in the coming week to accommodate Thursday's Thanksgiving public holiday. Existing home sales for October will be out on Monday, the second estimate of third-quarter GDP will be released on Tuesday and personal income and spending data and durable orders for October is scheduled for Wednesday. 

Nike (NKE) - Get Report shares led the Dow's gains on Friday after announcing a 2-for-1 stock split and increasing its quarterly dividend payment by 14%. The athletics wear company also was authorized to begin a $12 billion buyback plan at the end of fiscal 2016.

Alphabet (GOOGL) - Get Report added more than 2% on signs it is beefing up its cloud-computing business after hiring industry veteran Diane Greene. Greene, a co-founder of IT company VMWare, will head a new unit combining Google's cloud and apps businesses.

Tesla (TSLA) - Get Report tumbled 0.8% in afternoon trading on news the company is recalling all 90,000 Model S sedans to assess a possible defect involving seat belts. The automaker said the cost of the recall would be "immaterial."

Chipotle (CMG) - Get Report slumped 12.5% in afternoon trading after the Centers for Disease Control and Prevention said it was investigating even more cases of E.coli infection at the chain's locations. New cases have been reported at locations in states including California, Ohio, Minnesota and New York. The outbreak had previously been contained to Washington state and Oregon. 

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