Quiver Quantitative - Wall Street's key stock indexes, including the S&P 500 (SPY (NYSE:SPY)), Dow Jones Industrial Average (DIA), and Nasdaq (QQQ), experienced gains on Tuesday, buoyed by continued optimism over a potential Federal Reserve policy shift in the coming year. Investors, encouraged by Fed Chair Jerome Powell's recent remarks suggesting an end to the central bank's significant monetary tightening, are now factoring in the likelihood of rate cuts as early as March 2023. Market sentiments remained high even as policymakers tried to moderate the expectations set in the Fed's last meeting, with traders pricing in a significant chance of rate reductions totaling 143 basis points by the end of 2024, as indicated by the CME Group's (NASDAQ:CME) FedWatch tool.
The optimism in the markets was further fueled by a report from the Commerce Department, which revealed a significant surge in single-family homebuilding in November, leading to a 1.2% rise in the PHLX Housing index. The robust performance of the housing sector, combined with expectations for upcoming economic data including the final third-quarter GDP reading and the personal consumption expenditure index (PCE), added to the positive market outlook. Comments from Federal Reserve officials, such as Richmond Fed President Thomas Barkin and Atlanta Fed President Raphael Bostic, were also keenly awaited for insights into the central bank's interest rate strategy for the next year.
Market Overview: -Wall Street continued its rally, buoyed by persistent optimism for a Fed pivot towards looser monetary policy in 2024. -Major indices climbed, with the S&P 500 edging closer to its all-time record high, the Nasdaq 100 scaling new highs, and the Dow Jones Industrial Average reaching a fresh peak. -The bullish sentiment stemmed from investors pricing in aggressive rate cuts next year, despite attempts by Fed officials to dampen such expectations.
Key Points: -The S&P 500 rose 0.50%, closing just shy of its record high, fueled by continued hopes for a rate-cut pivot. -The Nasdaq 100 surged 0.54%, hitting a new all-time high amid strong performance in technology stocks. -The Dow Jones Industrial Average rallied 0.59%, achieving a fresh record high, further highlighting the broad market strength. -Single-family homebuilding data showing significant growth in November added to the positive sentiment.
Looking Ahead: -This week's economic calendar features crucial data releases, including the final reading of third-quarter GDP and the PCE index, the Fed's preferred inflation gauge. -Speeches from Fed presidents Bostic and Goolsbee could offer further insights into the central bank's thinking on future interest rate decisions. -Light trading volumes ahead of the holidays might lead to market volatility, but the overall direction seems to be upward, driven by rate-cut hopes.
In terms of individual stock movements, Accenture (NYSE:ACN) experienced a slight dip following a subdued revenue forecast for the second quarter, while Boeing (NYSE:BA) saw an uptick of 1.7% after Lufthansa (ETR:LHAG)'s order of 40 737-8 MAX jets. Kenvue (KVUE) also witnessed a rise of 4.1% following a favorable U.S. court ruling related to its Tylenol product. Conversely, PepsiCo's (NASDAQ:PEP) stock saw a decrease after J.P. Morgan (JPM) downgraded its rating, while Amgen (NASDAQ:AMGN) enjoyed a 1.7% increase following an upgrade by (BMO (TSX:BMO)).
Overall, the stock market demonstrated resilience, with advancing issues outnumbering decliners significantly on both the NYSE and Nasdaq. The S&P index and the Nasdaq recorded new highs and lows, reflecting the market's positive reaction to the potential easing of monetary policy and the encouraging signs in the housing sector.
This article was originally published on Quiver Quantitative