After a choppy start to the trading day, stocks ended the day higher on Monday as investors anticipated the Federal Reserve’s last policy decision of the year and a significant inflation report.
The S&P 500 (\GSPC) and Dow Jones Industrial Average (\DJI) closed at their highest points since January 2022 and March 2022, respectively, as each index increased by around 0.4%.
Reversing previous losses, tech companies also saw gains. The Nasdaq Composite (^IXIC) gained by 0.2%, reaching its highest closing since April 2022.
Investors are preparing for two events that might determine the direction of equities in 2024: the Fed’s interest rate decision and November’s consumer inflation report.
Friday’s jobs report increased expectations that the Fed will provide a “soft landing” for the US economy, which is struggling with historically high borrowing rates. With the S&P 500 and Nasdaq finishing at their highest points since early 2022, that assisted the gauges in capping their sixth consecutive week of gains.
The Consumer Price Index data, which is expected on Tuesday, will now be the main focus and might challenge this confidence. Expectations that the Fed will halt rate rises this week have been reinforced by signs of a lowering inflation rate, and bets are mounting that rates will be slashed before the summer.
Following the receipt of a $5.8 billion takeover bid, Macy’s (M) shares finished over 20% higher in the individual corporate market.
Investors will be analysing November’s Consumer Price Index (CPI), one of the key data points the Federal Reserve will take into account when making its next interest rate decision, on Tuesday.
According to predictions from Bloomberg, the inflation data, which is scheduled for publication at 8:30 a.m. ET, is anticipated to show headline inflation of 3.1%, a little slowdown from October’s 3.2% annual growth in prices. Consumer prices are predicted to be unchanged for a second consecutive month over the previous one.
According to Bank of America, lower energy prices probably prevented the headline statistics from showing a larger yearly growth.
Following a 2.5% decrease in October, the bank projects a 3.5% month-over-month fall in energy costs. Cheaper petrol will be the main cause of the decline.
According to Bloomberg statistics, prices are predicted to have increased 4.0% from the previous year in November on a “core” basis, which eliminates the more erratic costs of groceries and petrol. This is comparable to the yearly increase observed in October. Estimates for monthly core prices indicate a 0.3% increase, somewhat above October’s 0.2% monthly increase.
According to US economist Michael Gapen of Bank of America, greater costs for “volatile” categories like used automobiles and hotel away from home should result in a “firmer core” following price declines in October for both of those categories.
The price of bitcoin (BTC-USD) dropped below $41,000 on Monday, marking the sharpest decline in the previous four months, while Coinbase (COIN) shares tumbled more than 6%.
Concerns over the viability of cryptocurrency’s resurgence are raised by the stock of the cryptocurrency exchange declining. Before the weekend, bitcoin had been soaring, having increased by more than 150% year to date. This had some people wondering if the market was finally recovering from past scandals, most notably FTX’s demise.
In general, the recent explosive rise in cryptocurrency has increased stock prices of businesses that deal with digital assets, such as MicroStrategy (MSTR) and Coinbase. Investors are excited as they wait for the Securities and Exchange Commission (SEC) to decide whether to allow an exchange-traded fund (ETF) for spot bitcoin.
A short squeeze event, in which gains compel traders betting against a stock to purchase it back at a loss, may be more likely as a result of the bullishness. S3 Partners LLC data reveals that investors who gambled on drops in cryptocurrency-related firms including Coinbase, MicroStrategy, and Marathon Digital Holdings are currently nursing $6.05 billion in on-paper losses.
In the meanwhile, there is still a lot of ambiguity around the industry’s problems. Despite Binance Holdings’ recent $4.3 billion deal with the DOJ, which the company has requested the court to reject, the SEC decided on Friday that its action against the firm should proceed.
June saw the SEC file a lawsuit against Changpeng Zhao and the exchange for allegedly violating securities laws, mismanaging investor and regulator monies, and handling client cash improperly.
After rising as much as 14% on Friday, shares of Paramount Global (PARA) fell more than 3% on Monday.
The actions follow earlier claims from the New York Times and Puck that CEO David Ellison of Skydance Media and the private investment firm RedBird Capital were seeking to buy National Amusements’ voting shares in order to seize control of the media behemoth.
At present, Shari Redstone holds the positions of president of National Amusements (NAI), her family’s holding company that owns the business through its class A shares, and non-executive chairperson of Paramount Global.
By obtaining shares in National Amusements, RedBird and Skydance may be able to gain control over the business without making a complete acquisition.
The voting shares held by National Amusements, which accounts for about 10% of Paramount’s equity capital worth, are valued at approximately $1 billion. However, this valuation does not take into consideration the possibility of a “meaningful control premium,” as noted by Wells Fargo analyst Steve Cahall in a note to investors on Friday.
“We think there’s a decent chance a deal is done as we think the Redstone Trust may be ready to move on from operations to monetization,” Cahall said in a follow-up letter on Sunday. However, each possible transaction has a high degree of intricacy and time risk.”
Loop Capital further elucidated this intricacy in a note it sent on Friday, downgrading shares to Sell from Hold but holding onto its $12 price target.