The S&P 500 saw its biggest gain since April, rising by about 2%. For the tenth straight session, Nvidia Corp. had a surge driven by Tesla Inc. in the megacap space. Local banks saw a nearly 6% increase. Over 5% was added by the small-cap Russell 2000 index. The most shorted stocks as compiled by Goldman Sachs Group Inc. outperformed the overall market, suggesting that some traders may be getting ready to cover negative bets. Yields on two years fell by more than 20 basis points. The US dollar dropped 1.2%.
Bets on a “pivot” for next year have strengthened, despite the possibility that Wall Street’s bounce might lead to additional loosening of financial conditions and eventually complicate the Fed’s task. Fed swaps show that there is almost no chance of another raise, with the market pricing in a 50 basis-point rate reduction by July.
Bryce Doty of Sit Fixed Income Advisors stated, “It is likely that the remaining investors who are not persuaded that the Fed is done are throwing in the towel.” “A cut rather than another rate increase is more likely to be the next Fed action in the summer.”
According to Morgan Stanley’s Chris Larkin at E*Trade, the Fed will undoubtedly keep pushing back against the notion that the lower-than-expected data will inspire some investors to begin making plans for rate reduction in 2024.
Larkin said, “They’ve run a long race, and they won’t give up just because it looks like the finish line is getting closer.”
According to Chris Zaccarelli of Independent Advisor Alliance, investors are starting to understand that higher rates are off the table, thus the market should continue to rise regardless of whether the economy can avoid going into recession.
According to Richard Flynn at Charles Schwab UK, the decline in inflation indicates that recent monetary policy has been effective, increasing the likelihood of a “soft landing.” He pointed out that the news supports the likelihood that policymakers will “hold off” on more rate increases.
According to Neil Dutta, head of economics at Renaissance Macro Research, “the inflation data are’soft-landing nirvana’ for the equity markets” since the US economy is holding up.
Lauren Goodwin of New York Life Investments claims that the Fed may “sit tight for now” provided the disinflationary process is intact, which would reduce the likelihood of a “overly restrictive policy.” Nevertheless, she issues a warning to investors who are becoming “overly optimistic” since “financial conditions are now easing again, which keeps the Fed on guard and highly dependent on data.”
The market’s attempt to rush to the “endgame” puts the Fed at risk of a bigger or earlier loosening of financial conditions than the Fed would want to see, according to Krishna Guha of Evercore ISI. Therefore, anticipate a very cautious and somewhat hawkish tone from Fed officials.
Ken Gryphon, the founder of Citadel, stated that if the Fed lowers interest rates too soon, it might damage its image. According to ARK Investment Management’s chief executive, Cathie Wood, deflation is already occurring in the US across all industries and will compel the central bank to begin a significant cycle of interest rate reductions.
Although the latest statistics on US inflation is indicating a decline, Federal Reserve policymakers noted that more work has to be done before the inflation rate approaches the bank’s 2% objective.
“The Fed won’t raise rates any further is still our base case,” UBS Global Wealth Management’s Brian Rose stated. But the labour market is still too tight and inflation is still too high for the Fed to declare triumph and call a stop to the cycle of rate hikes.
If the data doesn’t suddenly turn negative, Rose believes that such an announcement is probably at least three months away. He pointed out that following an announcement, investors’ attention may be drawn to when the first rate decrease will occur, which might result in falling bond rates and a depreciating US currency.
On speculation that the Fed is finished raising interest rates, stocks have risen in November. The S&P 500 has gained more than 7% during this time, and it is on track to have its best month since October 2022.
Based on Bloomberg statistics, there has never been a negative year for the remaining part of the previous 22 years when the S&P 500 was up 5% or more by mid-November. If you go back 50 years, that configuration was positive 26 times out of 30 times, with four outliers when the drop was 1% or less.
According to the most recent Bank of America Corp. fund manager poll, investors were the most positive on bonds since the global financial crisis in the interim due to “strong conviction” that rates will drop in 2024.
Among the many people who were let down by last year’s rise, Pacific Investment Management Co. is extending the call for 2024.
In a research projecting “prime time” for the asset class in 2024, Pimco managers Erin Browne, Geraldine Sundstrom, and Emmanuel Sharef stated that bonds “have rarely been as attractive as they appear today” in comparison to stocks.
As demand for home improvement products declines, Home Depot Inc. has reduced its forecast for earnings and revenue this year.
On the second day of the Dubai Air Show, Boeing Co. maintained its successful order haul when it secured a contract with Ethiopian Airlines for more narrow- and widebody aircraft, while competitor Airbus SE persisted in pursuing an increasingly elusive agreement with Emirates.
Chief Executive Officer Sundar Pichai acknowledged that Google, a division of Alphabet Inc., pays Apple Inc. 36% of the advertising income generated from searches conducted in the Safari browser, which is the default search engine for Macs, iPhones, and iPads.
A late investment in Manchester United has been made by billionaire and former hedge fund manager Leon Cooperman. The football team is heading into the final stages of a year-long bidding battle.
After a months-long drama that gripped the mining sector, Glencore Plc will purchase a controlling interest in Teck Resources Ltd.’s coal division, paving the way for the commodities giant to exit the coal business itself.
As the ailing manufacturer weathers large losses at its wind-turbine sector, Siemens Energy AG has obtained a €15 billion ($16.2 billion) arrangement with the German government, its biggest shareholder, Siemens AG, and a consortium of banks.