Stock Market Forecast: Lower Ahead of Powell Remarks with Small Caps Leading; Plus, AI Stock Skyrockets 35%

At midday, indexes shifted upwards after Powell’s discussion during a fireside chat at Spelman College in Atlanta. Powell stated that job creation in the economy is moving towards a more sustainable level, cautioning against over-tightening, and warned against speculating about future policy changes. This led to a 10 basis point drop in benchmark yield to 4.25%, the lowest since Sept. 14.

The Nasdaq climbed 0.3%, S&P 500 rose 0.4%, and Dow Jones Industrial Average increased by 0.5%, reaching its highest point since January 2022. The Russell 2000 saw the strongest performance, surging by 1.8% on Friday. Volume rose on Nasdaq and fell on the NYSE compared to the same time on Thursday.

The Innovator IBD 50 ETF (FFTY) rallied 1.5% and could potentially close above the 200-day moving average for the first time since Sept. 12.

At 2 p.m. ET, Powell and Fed Gov. Lisa Cook scheduled a roundtable discussion at Spelman College.

This morning, the revised November S&P Global US Manufacturing Purchasing Managers’ Index remained unchanged, indicating a tough month for US manufacturers. The Institute for Supply Management manufacturing index also showed no improvement, indicating continuing contraction in manufacturing activity.

Despite this, the S&P 500 and Nasdaq reported the largest one-month percentage gain since July 2022, with the S&P rallying 8.9% and the Nasdaq 10.7%. For now, IBD continues to recommend 80%-100% exposure in the stock market, advising gradual adjustments as needed for new opportunities and profit-taking.

Several companies such as United Rentals (URI), InterContinental Hotels (IHG), AerCap Holdings (AER), and Iron Mountain (IRM) also saw significant movements in the stock market.

Elastic (ESTC) soared 31%, Samsara (IOT) jumped 18%, while Ulta Beauty surged 12% to its highest point in months. On the other hand, Marvell Technology (MRVL) and Dell Technologies (DELL) experienced a decline after reporting earnings.

Additionally, Alibaba (BABA) and Pfizer (PFE) also experienced fluctuations in response to market downgrades and news regarding their late-stage trials, respectively.

Alibaba saw a 2% decline following a downgrade from Morgan Stanley, while Pfizer slid 4% due to news of halting late-stage trials for a weight loss drug.

Finally, for more market insights, IBD suggested subscribing to their investing podcast, getting free newsletters, and using MarketSmith’s tools for individual investors.