Stocks rose at the start of the shortened trading week, and the final one of 2023, riding the momentum of a year-end rally in which hopes of a soft landing are strengthening and more optimistic reads on 2024 are taking hold.
The Dow Jones Industrial Average (^DJI) rose 0.4% or about 150 points at the closing bell on Tuesday. The benchmark S&P 500 (^GSPC) gained 0.4% while the the tech-heavy Nasdaq Composite (^IXIC) advanced 0.5%.
All three major indexes are up by double digits for the year, with the Nasdaq leading the way, boasting year-to-date gains of more than 40%. The S&P finished within striking distance of its all-time record, less than 30 points shy of 4,796.56, set at the start of 2022.
The surge in stocks arrives as Wall Street expects the Fed to soon end its tightening campaign, in a striking signal that the central bank's battle against inflation has taken a decisive and positive turn.
The year began with widespread worries of pricing pressures and the potentially destructive consequences of the Fed raising interest rates. But as the final days of the year have arrived, the narrative has shifted to talk of the Fed cutting rates, surprise at how much inflation has cooled, and the resilience of the job market. Many market watchers thought jobs growth would have been pummeled as a result of the central bank trying to tamp down the economy. But unemployment remains below 4%.
2024 will bring its own challenges. The recession that many thought was coming this year could still muscle its way in. Fed Chair Jerome Powell has emphasized that the timing of rate cutting isn't set in stone, and if the economy comes roaring back, inviting yet another climb in inflation, more rate hikes or a delay in cuts could be the next phase of the Fed's policy action.
"Most of 2023 has been about the resilient consumer and waiting for a recession which never came, but we think 2024 is going to be much more about inflation going back to target in a sustainable way or inflation getting 'stuck' and forcing the Fed to cut much less than the market expects," said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance.
Much of the growth in the stock market this year was tied to the healthy returns of big tech companies, most notably the Magnificent Seven. Apple (AAPL) and Microsoft (MSFT), for instance, have risen around 50% year to date, more than doubling the gains of the S&P's 24%. Meta (META), in an impressive reversal, has almost tripled its share price this year. And the AI darling Nvidia (NVDA) has surged nearly 240% this year.
In corporate news Tuesday, shares of Intel (INTC) gained more than 4% after the company confirmed it secured more than $3 billion in incentives from the Israeli government to expand wafer fabrication in the country.
Fresh real estate data showed that buyers, faced with tight supply, continue to bid up prices in the US housing market. Home prices rose nationally 4.8% in October compared to the same month last year, according to a new reading from the S&P CoreLogic Case-Shiller home price index published Tuesday. The 10-City Composite showed an increase of 5.7%, up from a 4.8% increase in the previous month. And the 20-City Composite posted a year-over-year increase of 4.9%, up from a 3.9% increase in the previous month.
“US home prices accelerated at their fastest annual rate of the year in October,” Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said in a statement. “We are experiencing broad-based home price appreciation across the country, with steady gains seen in 19 of 20 cities.”
Source : Yahoo Finance / Dec 26, 2023