Nasdaq Market Intelligence Desk November Review .

Consumer related stocks had a strong November.

Nasdaq Market Intelligence Desk November Review



  • Consumer related stocks had a strong November
  • Growth stocks continue to outpace Value, continuing a multi-year trend
  • All major U.S. equity indexes made new, all-time highs in November
  • The Dow has crossed five 1,000 point milestones in 2017 so far having never surpassed more than two in any prior year.

The bull market was alive and kicking in November which turned out to be one of the strongest months for equities in 2017. Leadership was evident amongst companies of all sizes with most of the major stock indices gaining about 3%. The large cap Dow Jones Industrials led the majors with a MTD gain of +3.8%, followed by the Midcap S&P 400 index +3.5%, and finally the small cap Russell 2000 and large cap S&P 500 each with gains of +2.8%. The Nasdaq Composite and 100 (NDX) indices “underperformed” with monthly gains of +2.2% and +1.9% due to end-of-month weakness in the technology sector.

Technology has been the leader throughout all of 2017 but that role could change over the near to intermediate term. Despite late November weakness, the S&P 500 technology index gained a respectable +1% for November and is now up +37% YTD. End-of-month weakness was evident throughout the various groups within tech (i.e. social, internet), however the standout was the semiconductor industry where the SOX Index saw its biggest one day decline of (4.4%) in 2017, leading to a modest decline of (0.24%) for the month. The SOX Index remains one of 2017’s best performing industries with a YTD gain of 40.4%, following 2016’s gain of 36.6%, however its November high came within 1.5% of the all-time high made at the peak of the 2000 Dotcom cycle. This current two year bullish run is now at the doorstep of a major resistance level while sporting overbought technicals, which suggests the semiconductor industry, and possibly the broader tech sector, is in the early stages of a period of consolidation. With the end of 2017 now just four weeks away, many investors may look to “lock and roll” whereby locking in gains of big winners and rolling those funds into other sectors of the market with seemingly better value.

SOX Index


One group that appears to be on the receiving end of the rotation trade is the consumer discretionary sector. The group benefitted in November from strong Black Friday and Cyber Monday sales. More than 174 million Americans went shopping between Thanksgiving and Cyber Monday compared to 164 million in 2016. The National Retail Federation (NRF) said that average spend over the 5 day period was $335.45 with Millennials being the highest spending demographic at $419.52. Black Friday is still the most popular brick-n-mortar shopping day with over 77 million consumers hitting the stores, while 81 million browsed online on Cyber Monday. The S&P 500 Consumer Discretionary sector gained 4.9% for the month, while the S&P 500 Retail sub-index (S5RETL) was up 5.5%. This comps nicely to a +2.8% gain in the broader based S&P 500 index. A number of Nasdaq-listed companies in S5RETL made new 52 week highs that helped propel the November move including AMZN, ROST, DLTR and GRMN.

Q3’17 U.S. GDP (the broadest measure of goods and services produced across the economy) proved to be solid with two consecutive quarters of +3% growth. The Commerce Department said that strong consumer spending coupled with improved business spending despite hurricanes helped raise the bar. Consumer spending accounts for two-thirds of U.S. economic activity and is a key cornerstone to measure economic activity in this country. The strong start to the holiday shopping season is a good sign that Q4’17 GDP will be robust. The U.S. economy has not seen three consecutive quarters of 3%+ GDP since ’04 -’05.


Other standouts this quarter included consumer staples (+5.4%), financials (+3.3%), and industrials (+3.5%). Staples lagged the broader market all year but outperformed all legacy sectors in November, and now sports a YTD gain of +8.3%. The Fins closed out November on a strong note based on prospects the Senate will pass the long awaited tax reform legislation. Tax reform is expected to boost economic activity, lending, and thus create upward pressure on yields. Supporting those who believe there is plenty of gas left in the tank of this bull market is the performance of the Dow Jones Transportation Index (TRANS) which gained +5.4% in November and, along with the industrials sector, continues to make fresh all-time highs. The new highs registered by both the industrials and transports is one of the primary tenets confirming a bull market, according to the 100+ year old Dow Theory.


Outside of the U.S., the emerging markets are having a banner year evidenced by the emerging markets ETF (ticker EEM) gaining 31.7% YTD, 1.8x the return of the S&P500’s +18.3%. This is only the second time in seven years in which emerging markets are outperforming the S&P 500, and it may be the start of things to come. The performance also highlights the fact that there is something more driving equities than U.S fiscal and tax policy. The below ratio of the emerging markets ETF (EEM) over the S&P 500 Index (weekly period) shows a multi-year downtrend beginning at the peak in October 2010 and bottoming in Q1’16. This initially was a major low back in 2004 and proved its importance when it held support in December 2016. Thus what we have is a large, 12-month double bottom pattern following a six year downtrend. In August the ratio broke out above the middle of the pattern which has since acted as support. Now it is just beginning to emerge above its multi-year downtrend line which is often a recipe for accelerating upside momentum. The long term nature of the pattern suggests a major low is in place and emerging markets could have years of outperformance ahead.


Looking Ahead:

Looking ahead to December and year end, we can expect to see tax selling into the last days of the trading year. Investors may look to sell stocks with YTD losses to harvest write offs and remove these stocks from year-end reports. Conversely, stocks that have shown strength year-to-date may benefit from additional funds flows. Friday, December 15 will be the final “Quad Witch” expiration for 2017. Concurrent with quad witch, we will see a number index rebalances including the Nasdaq 100 Index, Nasdaq Biotechnology Index and the S&P index family including the S&P 500 (large cap), S&P 400 (mid cap) and S&P 600 (small cap). So overall market volumes can be expected to tick up around these events.

On the macro front, the FED is expected to hike interest rates at their year-end meeting on December 13th. Congress will need to make a decision on the debt ceiling by December 8th as the new borrowing limit for the Treasury is now $19.8 trillion. The tax reform bill increasingly looks like it has enough votes to pass. If the House and Senate can reconcile their versions of the Bill, the President could sign it into law by year-end. Given that markets have rallied in advance of expected passage, this could be a sell-the-news event and a failure to pass legislation could disappoint investors.

The information contained herein is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. All information contained herein is obtained by Nasdaq from sources believed by Nasdaq to be accurate and reliable. However, all information is provided “as is” without warranty of any kind. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information. 

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading. 

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors. 

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq’s Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

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