Wall St hits fresh 2023 highs after inflation data; Fed on deck
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[December 13, 2023] By
Chuck Mikolajczak
NEW YORK (Reuters) -U.S. stocks closed at fresh highs of the year on
Tuesday, after inflation data did little to alter views for the timing
of a rate cut by the Federal Reserve, as investors awaited the central
bank's last policy decision of the year on Wednesday.
The November Consumer Price Index (CPI) rose 3.1% on an annual basis, in
line with estimates from economists polled by Reuters, as a drop in
gasoline prices was overshadowed by a rise in rents. Core prices,
excluding volatile items such as food and energy costs, also matched
expectations, showing a 4% annual rise.
On a month-on-month basis, consumer prices ticked up 0.1% last month,
compared with estimates of remaining unchanged.
Markets had recently been pricing in a rate cut by the Federal Reserve
as soon as March, but traders pared those bets and are now targeting May
for the first rate cut after the central bank began its hiking cycle in
March 2022.
Expectations for a cut of at least 25 basis points in March fell to
43.7%, from about 50% before the data, according to the CME Group's
FedWatch Tool. The market is now pricing in a chance of about 78% for a
cut in May, up from about 75% on Monday.
"The market is certainly assuming that inflation is going to keep coming
down, that earnings in this next year are going to show some decent
growth and the Fed is going to cut rates," said Scott Wren, senior
global market strategist at the Wells Fargo Investment Institute in St.
Louis.
"The market is counting on more of a soft landing that would allow the
Fed to ease up."
The Dow Jones Industrial Average rose 173.01 points, or 0.48%, to
36,577.94, the S&P 500 gained 21.26 points, or 0.46%, to 4,643.70 and
the Nasdaq Composite gained 100.91 points, or 0.70%, to 14,533.40.
The Dow closed at its highest level since Jan. 4, 2022, the S&P 500 its
highest close since Jan. 14, 2022, and the Nasdaq its highest closing
level since March 29, 2022.
Wren also said stocks were facing resistance at their highs of the year,
with a strong push to the upside unlikely for the near-to-intermediate
term.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., December 11, 2023. REUTERS/Brendan McDermid
Another factor dampening volatility could be an options expiration
at the end of the week, with the S&P 500 not registering a move of
1% in either direction for 19 straight sessions, the longest such
streak since August.
Markets will get another look at inflation data in the form of the
Producer Price Index (PPI) before all eyes turn to the Fed's policy
announcement at the conclusion of its two-day meeting on Wednesday.
The European Central Bank and the Bank of England are also scheduled
to deliver their policy verdicts later this week.
Oracle slumped 12.44% as the cloud services provider forecast
third-quarter revenue below estimates on slowing demand for its
cloud service.
Energy was the worst-performing of the 11 major S&P sectors, falling
1.35% as crude prices settled down nearly 4%. The tech sector,
however, was among the best-performing, rising for a fourth straight
session to close at a record high of 3,344.07, on track for its
biggest yearly percentage gain since 2019.
Google-parent Alphabet dipped 0.58% after "Fortnite" maker Epic
Games prevailed in its high-profile antitrust trial over the
company.
Advancing issues were roughly even with decliners on the NYSE while
declining issues outnumbered advancers by a 1.3-to-1 ratio on the
Nasdaq.
The S&P 500 posted 74 new 52-week highs and 2 new lows while the
Nasdaq recorded 198 new highs and 187 new lows.
Volume on U.S. exchanges was 10.52 billion shares, compared with the
10.95 billion average for the full session over the last 20 trading
days.
(Reporting by Chuck Mikolajczak in New YorkEditing by Matthew Lewis)
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