This week on Wall Street, Goldman’s market wrap highlighted the intriguing dynamics at play despite the Fed’s hawkish stance. Despite a 53% probability of a rate cut on December 10th compared to a 98% probability in late October, the market remained resilient. The firm observed constructive flow picture on their desk, with an uptick in buyers interacting with supply and a tactical bull case of “peak” negativity baked in. Momentum pair +386bps showed signs of stabilization as well.

In terms of flow skews, Asset Management and Hedge Fund flows were benign on the week. However, thematically, there was rotational flow with supply in Tech and demand in Large Cap pharma and therapeutics. The CTA short-term momentum threshold for the S&P 500 regained its level of 6725 (for now), and the next key level to watch is the medium-term momentum threshold of 6442, below which the market will have to absorb more than $32 billion of supply in a one-week period.

Gross trading activity saw an increase at the fastest pace since early April, driven by long buys outpacing short sales (1.2 to 1). Macro Products (Index and ETF combined) were modestly net sold, led by short sales > long buys (2.3 to 1). Single Stocks saw the largest increase in gross trading activity in over four years, driven by long buys outpacing short sales (3.4 to 1). Health Care was the most net bought US sector for a second straight week, driven entirely by long buys. Nearly all Health Care subsectors were net bought on the week (sans HC Providers & Svcs), led by Biotech and Pharmaceuticals. On the other hand, Energy was the most net sold sector and saw the largest selling in nearly five months, driven by short and long sales (3 to 1). All sectors saw increased gross trading flow, led in $ terms by Info Tech (short sales > long buys).

Overall, Goldman’s wrap highlighted the market’s ability to shrug off hawkish sentiment from the Fed and instead focus on rotational flow dynamics. The firm’s analysis suggests that while the near-term outlook remains uncertain, the market may be pricing in a more optimistic view of the economy and corporate earnings.