Following a seven-week surge, the S&P 500 had a 0.5% increase as news of over $40 billion in mergers and acquisitions broke on Monday, following months of underwhelming volumes. For the second straight day, the Nasdaq 100 closed at a record after rising 0.6%.
Read more: In the last stretch of the year, dealmakers reveal a $40 billion M&A frenzy.
Wall Street’s fear barometer, the VIX, remained close to recent multi-year lows, staying around 12.
This week, in the midst of one of the strongest short-term rallies in recent memory, we’ll see if the stock market’s seasonal tendency to rise in the second half of December encounters possible exhaustion, according to Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley.
Near-term data readouts, such as durable goods orders, personal consumption expenditures (PCE), the Fed’s favoured measure of inflation, and the final third-quarter GDP estimate, may determine whether or not the S&P 500 can continue its surge for an eighth week.
In an email, Larkin stated, “The S&P 500 has only closed higher seven weeks in a row 20 other times since 1964, and it’s stretched the run to eight weeks 12 of those times.”
Treasuries saw a pause in their advance on Monday, even as markets mostly ignored Federal Reserve officials who were attempting to temper expectations for an earlier and more significant rate decrease than anticipated. The two-year yield increased at a rate of about 4.5%, while the 10-year yield approached 4%. The yen declined as the dollar held steady.
The newest central bank presidents to join the rising chorus attempting to temper market excitement on cutbacks are Austan Goolsbee of the Chicago Fed and Loretta Mester of the Cleveland Fed. Last week, their New York counterpart John Williams declared that wagers on a March decrease were premature.
Markets haven’t been convinced by policymakers, says BMO Capital Markets strategist Ian Lyngen. According to him, the current changes in Treasuries are more likely the result of consolidation following a sharp surge.
Investors undoubtedly concur with the Fed’s emphasis on the notion that monetary policy is now data-dependent, according to Lyngen. “The market is betting that the data breaks lower faster than the Committee, which is the difference.”
In response to ECB President Christine Lagarde’s remarks last week that the bank had not considered any cutbacks at all, Bostjan Vasle, a member of the Governing Council of the European Central Bank, adopted a cautious stance.
As the central bank of Japan kicks up a two-day policy meeting on Monday, traders will also be keeping a close eye on the country. A Bloomberg survey of over 50 economists revealed that while there has been growing speculation that the Bank of Japan may soon abolish the world’s final negative-rate regime, most regard April as the most likely time for a shift. Of these, 15% predict Ueda to cease negative rates in January.
In a note, Societe General analysts led by Wei Yao stated that “the BOJ has little need to rush into making policy changes.” Markets, however, will be alert for any indication that the board is prepared to abandon yield curve management or negative rates.
In terms of commodities, gold increased in value while oil continued to rise from the previous week due to major shipping lines stopping service via the Red Sea as a result of increasing attacks on merchant ships. Bitcoin fell sharply.
See Also: Fed Representatives Join the Chorus Opposing Rate-Cut Bets
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