NEW YORK – U.S. stocks prolonged their rally on Tuesday, kicking off the ultimate week of 2023 with expectations that the Federal Reserve will begin cutting rates of interest 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 course for monthly, quarterly and annual gains.
Rate of interest 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% goal.
“The momentum stays towards the upside,” said Peter Cardillo, chief market economist at Spartan Capital Securities in Recent York, noting nonetheless that a powerful rally was unlikely in light trading.
“We had a very good inflation number on Friday. If inflation continues to maneuver down in January and February, there’s a very good likelihood that the Fed may cut (rates) sooner than anticipated.”
The S&P 500 is on course to post its biggest quarterly gain in three years, and is inside 0.5% of its all-time closing high reached in January 2022.
Traders work on the ground on the Recent York Stock Exchange (NYSE) in Recent York City, U.S., December 11, 2023. REUTERS
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 tip of its rate hike cycle and opened the door to potential rate cuts in 2024.
Eventually glance, markets had baked in a 72.7% likelihood of a 25 basis point reduction within the Fed funds goal rate as soon as March, in response to CME’s FedWatch tool.
The Dow Jones Industrial Average (.DJI) rose 159.36 points, or 0.43%, to 37,545.33, the S&P 500 (.SPX) gained 20.12 points, or 0.42%, to 4,774.75 and the Nasdaq Composite (.IXIC) added 81.60 points, or 0.54%, to fifteen,074.57.
All 11 major sectors of the S&P 500 resulted in the green.
Energy shares (.SPNY) 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 purchase a 25% stake within the soccer club at $33 per share.
Gracell Biotechnologies (GRCL.O) surged 60.3% after AstraZeneca (AZN.L) said it would buy the China-based firm for as much as $1.2 billion.
Intel Corp (INTC.O) 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 construct 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 latest 52-week highs and no latest lows; the Nasdaq Composite recorded 222 latest highs and 48 latest lows.
Volume on U.S. exchanges was 9.99 billion shares, compared with the 12.56 billion average for the complete session during the last 20 trading days.
Reporting by Stephen Culp; Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Richard Chang
