At around 4.45%, ten-year rates decreased by eight basis points. After a surge that brought equities close to “overbought” levels, the S&P 500 saw no movement. Macy’s Inc. increased on a beat on profits, but Walmart Inc. fell with a negative tone on the prospects for customers. Cisco Systems Inc. plummeted on a negative projection. Applied Materials Inc. fell during late trade on news that it is the subject of a criminal investigation by the US for breaking export regulations to China. Crude oil fell below $73.
Wall Street was closely monitoring further economic data on Thursday, as the number of US jobless claims continued to rise to a record high in almost two years. Overshooting in factory output was mostly caused by a slowdown in activity at automakers and parts suppliers due to strikes. In the meantime, 2023 saw the lowest level of builder sentiment.
According to Jamie Cox of Harris Financial Group, “the lags in monetary policy are catching up with the economy now—from input costs to industrial production to labour.” The focus of the battle now is on preventing a recession and maintaining economic growth rather than inflation. Less people realise that rate cuts are imminent.
Fed Governor Lisa Cook stated that she is aware of the possibility of an overly severe economic downturn and pointed to the pressure that tighter financial conditions are placing on some industries. President of the Federal Reserve Bank of Cleveland Loretta Mester told CNBC that authorities have time to assess how the economy is changing before deciding if another raise is still necessary.
Although rate decreases are still a ways off and it’s too soon for the Fed to declare victory over inflation, statistics like the latest ones will allay any fears about another raise, says Chris Larkin of Morgan Stanley at E*Trade.
Now, the issue is whether the stock market will continue to have upward momentum from this kind of “Fed-friendly data,” he said.
Following a surge from “oversold” levels, which was fueled by short covering and expectations the central bank is done raising interest rates, the market faltered. Even now, the S&P 500 is headed for its best month in more than a year.
“After the rise up, the risk/reward is not as favourable. Nevertheless, the overwhelming body of data indicates that there is still some small upside in this rise, even after the anticipated short-term stop, according to Keith Lerner of Truist Advisory Services.
Future market volatility is still possible, and it depends heavily on data, according to Chris Gaffney, head of EverBank’s global markets division.
“Moving forward, through the end of the year and actually into the next year, there will be more volatility due to the back-and-forth between the markets and the Fed,” he continued.
According to James Demmert, chief investment officer at Main Street Research, investors realised the Fed is probably done raising interest rates, which led to the current stock market rise.
“More short covering and underweight stock positions among institutional and retail investors will probably push the market higher through year-end,” he said.
Even though equities had a remarkable run this year, investors stayed away from them due to a hazy economic outlook and enticing returns on cash. According to Goldman Sachs Group Inc., the caution will last until 2024.
The bank’s top US equity strategist, David Kostin, stated, “We anticipate positive returns to equities, but a 5% return risk-free in cash remains a competitive alternative.” “The yield on a 3-month Treasury bill in the current interest rate environment is 5.5%, which is comparable to the earnings yield on the S&P 500 index.”
As they negotiate a “soft-ish” economic landing, global equities will beat bonds in 2024, according to strategists at Barclays Plc, who are the most recent to voice optimism about the asset class.
The Ajay Rajadhyaksha-led group switched from core fixed income to global stocks and stated they anticipate “mid- to high single-digit returns” in both the US and Europe in 2019. This prediction is still valid despite the fact that bond rates are still high and S&P 500 profit estimates “seem too optimistic to us,” the authors stated.
In the meanwhile, investors sought safe havens due to interest rates above 5% and volatility in fixed-income markets, pushing money-market fund assets to an all-time high for the second consecutive week.
In other places, oil fell sharply as trend-following trades intensified losses caused by building stockpiles and the breakdown of important technical support levels.
Apple Inc.’s multibillion-dollar attempt to produce an iPhone modem chip has been further hampered by the intricacy of substituting a complicated Qualcomm Inc. component.
Beginning in the upcoming year, buyers of Hyundai Motor Co. automobiles will be able to do so on the website of Amazon.com Inc.
Gap Inc. revealed higher-than-expected third-quarter earnings and a less significant decline in comparable sales.
In the midst of walkouts and layoffs, Walgreens Boots Alliance Inc. has decided to close the majority of its shops and pharmacies on Thanksgiving Day, providing thousands of employees with an unexpected day off.