Wall Street ends higher in final stretch of 2023, rate cuts in view
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[December 27, 2023] By
Stephen Culp
NEW YORK (Reuters) -U.S. stocks extended their rally on Tuesday, kicking
off the final week of 2023 with expectations that the Federal Reserve
will begin cutting interest rates as soon as March.
All three major U.S. stock indexes rose in light trading a day after the
Christmas holiday, with the S&P 500 touching its highest intraday level
since January 2022. All three are on track for monthly, quarterly and
annual gains.
Interest rate sensitive megacap stocks and chip shares led the upward
momentum.
On Friday, the three indexes notched their eighth straight weekly gains
- their longest weekly winning streaks in years - as economic data
indicated inflation is easing down closer to the Fed's average annual 2%
target.
"The momentum stays towards the upside," said Peter Cardillo, chief
market economist at Spartan Capital Securities in New York, noting
however that a strong rally was unlikely in light trading.
"We had a good inflation number on Friday. If inflation continues to
move down in January and February, there's a good chance that the Fed
may cut (rates) earlier than anticipated."
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The S&P 500 is on track to post its biggest quarterly gain in three
years, and is within 0.5% of its all-time closing high reached in
January 2022.
Closing above that level - 4,796.56 - would confirm the benchmark index
has been in a bull market since touching the bear market nadir, the
closing low reached in October 2022.
Stocks' eight-week rally shifted into overdrive two weeks ago after the
Fed signaled the end of its rate hike cycle and opened the door to
potential rate cuts in 2024.
At last glance, markets had baked in a 72.7% likelihood of a 25 basis
point reduction in the Fed funds target rate as soon as March, according
to CME's FedWatch tool.
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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/File
Photo
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The Dow Jones Industrial Average rose 159.36 points, or 0.43%, to
37,545.33, the S&P 500 gained 20.12 points, or 0.42%, to 4,774.75
and the Nasdaq Composite added 81.60 points, or 0.54%, to 15,074.57.
All 11 major sectors of the S&P 500 ended in the green.
Energy shares enjoyed the heftiest percentage gain, boosted by
surging crude prices as Middle East strife ratcheted up supply
concerns, while optimism over Fed rate cuts fueled demand hopes.
Shares of Manchester United rose 3.4% after billionaire Jim
Ratcliffe struck a long-awaited deal to buy a 25% stake in the
soccer club at $33 per share.
Gracell Biotechnologies surged 60.3% after AstraZeneca said it will
buy the China-based firm for up to $1.2 billion.
Intel Corp rose 5.2% following the Israeli government's agreement to
endow a $3.2 billion grant for a $25 billion plant the chipmaker
plans to build in southern Israel.
Advancing issues outnumbered decliners on the NYSE by a 3.31-to-1
ratio; on Nasdaq, a 2.25-to-1 ratio favored advancers.
The S&P 500 posted 50 new 52-week highs and no new lows; the Nasdaq
Composite recorded 222 new highs and 48 new lows.
Volume on U.S. exchanges was 9.99 billion shares, compared with the
12.56 billion average for the full session over the last 20 trading
days.
(Reporting by Stephen Culp; Additional reporting by Shubham Batra
and Amruta Khandekar in Bengaluru; Editing by Richard Chang)
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