On December 6th, the stock market's closure sent mixed signals as the three major indexes experienced varied performancesAccording to Wind data, the Dow Jones Industrial Average fell by 0.28% to close at 44,642.52 pointsIn contrast, the S&P 500 and Nasdaq both achieved new closing highs, rising by 0.25% to 6,090.27 points and 0.81% to 19,859.77 points, respectivelyThis week's market trend saw the Dow decrease by 0.6%, while the S&P 500 and Nasdaq appreciated by 0.96% and 3.34%, respectively.

Exciting gains were noted in the technology sector, particularly with companies like Canaan Creative experiencing a surge of over 35%. Other notable shifts included Bit Digital rising by over 9% and Coinbase seeing a growth surpassing 7%. The Nasdaq Golden Dragon China Index also reflected positive movement, rising by 0.98%, accumulating a total increase of 2.15% for the weekMany Chinese concept stocks followed suit—Youdao growing over 6%, Alibaba and JD over 2%, while iQIYI and NetEase managed to gain over 1%. However, not all fared well, as Gaotu and New Oriental recorded declines of over 4% and 1%, respectively.

Data indicates an astonishing rise in the price-to-book ratio of the S&P 500, now reaching 5.3x for 2024, edging close to levels experienced during the tech bubble peak of 2000 when it hit 5.5x

Market experts are wary; Hartford Investment Management stated that if the S&P 500 approaches 6,666 points in early 2025—which is about 10% higher than its current standing—investors could face the risk of an overheated marketAfter benefiting from an AI-fueled optimism, the S&P 500 has already surged an impressive 27% this year, marking its best performance since 2019.

Yet, American Bank's Bull-Bear Indicator suggests that global investors are not exhibiting signs of irrational exuberance as seen in previous market cyclesFurthermore, several institutions highlight limited short-term upward momentum for U.SstocksGuozheng International points out that the prevailing sentiment seems to favor a Fed rate cut in December, although Chairman Powell emphasized a stronger economic landscape and rising inflation expectations since September, hinting at potential adjustments in the Fed's rate guidance for 2025.

Investors are attentively watching next week’s Consumer Price Index (CPI) data release, aware that any deviation could serve as a catalyst for stock market corrections given the current valuations and investment sentiment indicating a slight correction may be imminent

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A further analysis by Huafu Securities suggests limited immediate upside potential for U.Sstocks, given the relatively high valuations and the dominance of technology stocks which account for a significant portion of market capitalizationAs of late November, the S&P 500’s price-to-earnings ratio was reported at 25.3x, substantially higher than the median of the past decadeThe concentration is striking, with the top ten market leaders now accounting for over 35% of market capitalization, a figure not seen in the last 20 years.

The recently published U.Snon-farm payroll data for November surpassed expectations, sparking an increase in bets on the Fed cutting ratesEmployment numbers indicated an addition of 227,000 jobs, exceeding the market forecast of 200,000 and representing the largest growth since MarchRevisions indicated an upward adjustment of October’s data from 12,000 to 36,000, along with a collective upward revision of 56,000 jobs for September and October combined

Notably, the unemployment rate ticked up to 4.2%, slightly above the anticipated 4.1% and previous value of 4.1%.

Following the release of the employment figures, the dollar index experienced a sharp decline before recovering quickly to form a pronounced V-shape reversal, indicating the market’s responsiveness to economic dataInstitutional perspectives hint at the potential for another rate cut by the Federal Reserve this month, though participants are cautious given the labor demand's steady growthThe CME FedWatch tool registered a significant jump in the likelihood of a December rate cut, soaring to 91% post-release, compared to the previous day’s 71% prediction.

Varied interpretations of the latest data have emerged from Wall Street analysts regarding the trajectory of the Federal Reserve's policiesFlorian from Lombard Odier Investment Managers, for instance, noted that the reports illustrate an overall steady economic trend, suggesting a possibility of a rate cut this December, but also indicating that the normalization process is nearing its end while forward guidance may have limited impact on expected inflation cycles.

Furthermore, Michael Brown from Pepperstone forecasted a 25-basis-point cut by the Fed this month, supported by the ongoing normalization of the labor market

Scott Ren from Wells Fargo Investment Institute, however, cautioned that although the market expects a December rate cut, an average hourly wage growth of 4% suggests persistent wage pressures that could neutralize any immediate impacts on inflation targets.

Collectively, these insights underline the complexities and uncertainties in the Federal Reserve’s policy path moving forward, with employment data potentially amplifying the divergences in decision-making views within the FedEarlier this week, Chairman Powell emphasized that a more cautious approach could be justified concerning rate cuts as the U.Seconomy remains in strong standing, albeit inflation levels have exceeded previous expectationsMeanwhile, Fed Governor Bowman declared that inflation remains the top consideration in decision-making.

In addition, the gold market reacted positively to rising expectations around a potential 25-basis-point Fed rate cut, allowing international gold prices to see a modest uptick