If the Econ Data Behaves, December’s First Licks Could Be Straight-Up

Our View

I don't need the Wall Street Journal to tell me why the S&P and Nasdaq rallied. I’ve learned over the years not to pat myself on the back, but after all the hoopla and AI bubble scare tactics, the ES is back where it was when the sell-off started.

I never fell for any of the "AI Bubble" BS, and after the 6525.00 low on 11/20, the ES has rallied 338.55 points. Over the last five sessions, it has rallied +239.25 points or +3.62%, and is 91 points off its all-time contract high of 8954.75.

The NQ made its low on 11/20 at 24,073.27 and made a high on Friday at 25,499.75 — that’s a gain of 1,426.50 points or +5.93%. Over the last five sessions, the NQ has gained 1,176.50 points or +4.84%, and is now 899.25 points off its 26,399.00 all-time contract high.

JPMorgan and Goldman Sachs Rate Cut Reversal

J.P. Morgan and Goldman Sachs now forecast a 0.25% bps Federal Reserve rate cut during the December 9–10 FOMC meeting, which would lower the federal funds target range from the current 3.75–4.00% to 3.50–3.75%.

J.P. Morgan reversed its earlier January call after recent Fedspeak—notably from New York Fed President John Williams—tilted the balance, while Goldman Sachs says the soft September jobs report effectively “sealed” the move, especially with no major data releases left before the meeting.

Both banks cite cooling labor-market trends and moderating inflation (near the 2% target, excluding tariff effects) as justification, following the Fed’s back-to-back 0.25% bps cuts in September and October.

Market pricing on the CME FedWatch Tool has jumped to roughly 85% odds of a December cut (up from 30% in mid-November), even as Chair Powell insists there is “no preset course,” and some officials remain wary of inflation risks. With the Fed also ending balance-sheet runoff on December 1, attention is squarely on this potential final cut of 2025.

The Week Ahead

Fed Blackout, Economic Reports, and Earnings Key Events

The Fed's Blackout period started Saturday, November 29, and ends on December 11. To learn more about the Fed Blackout Period, you can find the official blackout calendar on the Federal Reserve Board website.

After Salesforce on Tuesday, the rest of the week is very quiet for big-cap earnings reports.

Our View

Despite the 5-day rally, the ES still closed down 2.82% and the NQ closed down 1.92%. That said, the end-of-month rotation favored buying, and I think that's what we’ll see in the first trading days of December, barring some past-due, negative economic reports, which could cause some type of temporary sell-off.

As of last Friday’s close, 95% of the S&P have reported their third-quarter earnings, with 83% of the companies beating analysts’ earnings per share (EPS) estimates—higher than the long-term average—and marking one of the strongest quarters since 2021.

Market Recap

In true fashion, the ES traded up to 6810.75 on Globex and opened Wednesday's regular session at 6805.00, up 24.75 points or +0.36%. What did the ES do next? It rallied 18.75 points up to 6823.75 at 9:50, sold off down to the RTH low at 6795.75, rallied 50.75 points up to 6846.50 at 11:40, traded down to 6833.50, rallied up to a lower high at 6844.50 at 1:25, sold off down to 6824.75 at 1:45, rallied up to 6843.25 at 2:30, and then rallied up to 6845.25 at 3:15.

After the high, the ES and NQ both started going offered, the ES traded down to 6835.50 as the 3:50 imbalance showed $1.7 billion to sell, then sold off down to 6825.25 at 3:55.

On Wednesday night’s Globex session into Thursday’s Globex session, the ES traded up to 6846.67 and settled at 6828.00, up 46.50 points or +0.69% on a total volume of 1.459 million contracts traded. On Friday, the ES traded up to 6863.75 and settled at 6857.25, up 29.25 points or +0.43%. The NQ settled at 25,085.50, up 131,590 points or +0.55% on the day.

In the end, the market powered higher. In terms of the ES and NQ’s overall tone, they did exactly what they did Monday and Tuesday: they gapped higher, rallied, sold off, and then rallied again.

During Friday's holiday extended Globex trade, the CME experienced an outage from a CyrusOne data center cooling failure that halted trading until 8:30 a.m. Friday and thinned post-Thanksgiving volume. Stocks closed at two-week highs and up five sessions in a row. The semiconductors and energy stocks rallied, with WTI crude up over 1%. The big November month-end rebalance, plus the index markets pricing in an 83% probability of a 25 bps Fed rate cut at the December 9–10 FOMC meeting, came even as October jobs and CPI data were scrapped and folded into delayed November reports due December 16 and 18.

It takes days and weeks to knock the S&P down—and only one to bring it back.

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