Stocks edged higher as the S&P 500 reached a nearly 2-year high, while the Dow Jones Industrials and Nasdaq 100 hit all-time highs. The S&P 500 Index rose by +0.13%, the Dow Jones Industrials Index increased by +0.16%, and the Nasdaq 100 Index saw a gain of +0.11%.
Investors are buoyed by expectations that the Federal Reserve will commence interest rate cuts in early 2024. Additionally, technology stocks are receiving support amid the enthusiasm for artificial intelligence, driving gains in chip stocks.
In economic news, the weekly U.S. initial unemployment claims rose more than anticipated, and November pending home sales were weaker than expected, presenting dovish factors for Fed policy. Concurrently, a decline in crude prices is affecting energy stocks adversely.
U.S. weekly initial unemployment claims increased by +12,000 to 218,000, reflecting a weaker labor market compared to the expected increase to 210,000. November pending home sales remained unchanged month-over-month, falling short of the anticipated +0.9% increase.
Market expectations suggest a 16% probability of a -25 basis points rate cut at the next FOMC meeting on Jan 30-31, with a 100% certainty for the same rate cut in the following meeting on March 19-20.
Government bond yields in the U.S. and Europe experienced an uptick, with the 10-year T-note yield rising by +2.0 basis points to 3.815%. Overseas stock markets showed mixed results, with the Euro Stoxx 50 down by -0.24%, China’s Shanghai Composite Index up by +1.38%, and Japan’s Nikkei Stock Index down by -0.42%.
Notable stock movements include casino stocks climbing after a report of a +22.6% year-over-year increase in Las Vegas Strip Nov gambling revenue. Caesars Entertainment, Las Vegas Sands, Wynn Resorts Ltd, and MGM Resorts International are among the gainers. Paramount Global is up on potential M&A activity, while American International Group and Chubb Ltd are up following positive coverage initiation by HSBC. Regeneron Pharmaceuticals gained after a court ruling, and LanzaTech Global rose after receiving a buy recommendation from Janney Montgomery Scott LLC. Conversely, Boeing is down due to concerns about inspections of 737 MAX airplanes, and energy stocks, including APA Corp, Baker Hughes, ConocoPhillips, Marathon Oil, Haliburton, Devon Energy, Diamondback Energy, and Schlumberger, are under pressure with a nearly -1% decline in WTI crude oil prices.
In the bond market, 10-year T-notes are down, influenced by higher yields in European government bonds following hawkish ECB comments. The dollar index posted a 5-month low, down -0.20%, with strength in the yen contributing to the downward pressure. Expectations for a Fed rate cut in 2024 are also affecting the dollar, while higher T-note yields limit the downside.
EUR/USD is up by +0.04%, reaching a 5-month high, driven by hawkish comments from ECB Governing Council member Holzmann. The markets are pricing in a 7% chance of a -25 basis points rate cut by the ECB at its next meeting on Jan 25, increasing to 71% for the following meeting on March 7. USD/JPY is down by -1.04%, with the yen reaching a 5-month high due to hawkish comments from BOJ Governor Ueda and positive Japanese economic news.
In the commodities market, February gold is down -0.20%, and March silver is down -0.55%. Precious metals are experiencing moderate losses, influenced by higher global bond yields and hawkish comments from ECB Governing Council member Holzmann. However, losses are limited as the dollar index reached a 5-month low.
Featured Image: Megapixl © Alexandersikov
