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Wall Street closed sharply higher on Tuesday, led by energy and tech stocks. Markets continued to rally on rate-cut expectations despite yet another Fed official turning hawkish. Energy prices hit a two-week high over concerns in the Red Sea region. All of the three major stock indexes ended in the green.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) added 251.9 points, or 0.7%, to close at 37,557.92. Twenty-four components of the 30-stock index ended in positive territory, while six ended in negative.
The tech-heavy Nasdaq Composite gained 0.7%, or 98.03 points, to close at 15,003.22.
The S&P 500 rose 0.6%, or 27.81 points, to close at 4,768.37. All of the 11 broad sectors of the benchmark index closed in the green. The Energy Select Sector SPDR (XLE), the Communication Services Select Sector SPDR (XLC) and the Materials Select Sector SPDR (XLB) advanced 1.2%, 1% and 0.9%, respectively.
The fear-gauge CBOE Volatility Index (VIX) decreased 0.2% to 12.53. A total of 11.6 billion shares were traded on Tuesday, lower than the last 20-session average of 12 billion. Advancers outnumbered decliners on the NYSE by a 4.68-to-1 ratio. On the Nasdaq, advancing issues led to declining ones by 2.85-to-1.
Investors Remain Upbeat Despite Another Fed Official Turning Hawkish
Over the past few weeks, Wall Street has continued to ride on the rate cut rally. Market participants have remained hopeful that there will be multiple rate cuts in 2024. In fact, per CME’s FedWatch tool, currently, there is a 67.5% possibility that the central bank will announce a 25 bps rate cut in March of next year.
Fed officials, however, in recent sessions, have started to balance things out a bit by turning a bit hawkish. More and more important Fed officials are coming out and saying that the markets might have gotten ahead of themselves and may have read too much into Fed Chair Jerome Powell’s post-FOMC speech. Also, per the Fed December meeting, there are only three rate cuts planned in 2024, while investors are anticipating at least five or six.
Atlanta Fed president Raphael Bostic joined this set of cautious Fed officials on Tuesday, stating that there is no current urgency for the apex bank to reduce interest rates in the United States given the strength of the economy and that inflation needs to return to the central bank's stated target of 2%. Bostic expects 25 bps rate cuts in the second half of the year but emphasized that inflation remains too high for that to happen.
“Inflation is going to come down relatively slowly in the next six months, which means that there's not going to be urgency for us to start to pull off of our restrictive stance," Bostic said in a program at the Harvard Business School Club of Atlanta. However, just like the previous sessions, the market has continued to disregard these comments and has boomed.
Energy Sector Drives the Market on Red Sea Concerns
Oil prices shot up for a second session in a row this week, rising more than a dollar a barrel on Tuesday. Yemen's Houthi militants attacked ships in the Red Sea, disrupting maritime trade and pushing up energy prices. Brent crude rose $1.28, or 1.6%, to settle at $79.23/barrel. WTI crude rose 97 cents, or 1.3%, to settle at $73.44/barrel, the highest in over two weeks.
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that building permits for November had come in at a seasonally adjusted annual rate of 1,460,000. The number for October had been revised up to 1,498,000 from the previously reported 1,487,000.
Housing starts for November increased to a seasonally adjusted annual rate of 1,560,000. The number for October was revised down to 1,359,000 from the previously reported 1,372,000.
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Stock Market News for Dec 20, 2023
Wall Street closed sharply higher on Tuesday, led by energy and tech stocks. Markets continued to rally on rate-cut expectations despite yet another Fed official turning hawkish. Energy prices hit a two-week high over concerns in the Red Sea region. All of the three major stock indexes ended in the green.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) added 251.9 points, or 0.7%, to close at 37,557.92. Twenty-four components of the 30-stock index ended in positive territory, while six ended in negative.
The tech-heavy Nasdaq Composite gained 0.7%, or 98.03 points, to close at 15,003.22.
The S&P 500 rose 0.6%, or 27.81 points, to close at 4,768.37. All of the 11 broad sectors of the benchmark index closed in the green. The Energy Select Sector SPDR (XLE), the Communication Services Select Sector SPDR (XLC) and the Materials Select Sector SPDR (XLB) advanced 1.2%, 1% and 0.9%, respectively.
The fear-gauge CBOE Volatility Index (VIX) decreased 0.2% to 12.53. A total of 11.6 billion shares were traded on Tuesday, lower than the last 20-session average of 12 billion. Advancers outnumbered decliners on the NYSE by a 4.68-to-1 ratio. On the Nasdaq, advancing issues led to declining ones by 2.85-to-1.
Investors Remain Upbeat Despite Another Fed Official Turning Hawkish
Over the past few weeks, Wall Street has continued to ride on the rate cut rally. Market participants have remained hopeful that there will be multiple rate cuts in 2024. In fact, per CME’s FedWatch tool, currently, there is a 67.5% possibility that the central bank will announce a 25 bps rate cut in March of next year.
Fed officials, however, in recent sessions, have started to balance things out a bit by turning a bit hawkish. More and more important Fed officials are coming out and saying that the markets might have gotten ahead of themselves and may have read too much into Fed Chair Jerome Powell’s post-FOMC speech. Also, per the Fed December meeting, there are only three rate cuts planned in 2024, while investors are anticipating at least five or six.
Atlanta Fed president Raphael Bostic joined this set of cautious Fed officials on Tuesday, stating that there is no current urgency for the apex bank to reduce interest rates in the United States given the strength of the economy and that inflation needs to return to the central bank's stated target of 2%. Bostic expects 25 bps rate cuts in the second half of the year but emphasized that inflation remains too high for that to happen.
“Inflation is going to come down relatively slowly in the next six months, which means that there's not going to be urgency for us to start to pull off of our restrictive stance," Bostic said in a program at the Harvard Business School Club of Atlanta. However, just like the previous sessions, the market has continued to disregard these comments and has boomed.
Energy Sector Drives the Market on Red Sea Concerns
Oil prices shot up for a second session in a row this week, rising more than a dollar a barrel on Tuesday. Yemen's Houthi militants attacked ships in the Red Sea, disrupting maritime trade and pushing up energy prices. Brent crude rose $1.28, or 1.6%, to settle at $79.23/barrel. WTI crude rose 97 cents, or 1.3%, to settle at $73.44/barrel, the highest in over two weeks.
Consequently, shares of Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) jumped 1.3% each, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that building permits for November had come in at a seasonally adjusted annual rate of 1,460,000. The number for October had been revised up to 1,498,000 from the previously reported 1,487,000.
Housing starts for November increased to a seasonally adjusted annual rate of 1,560,000. The number for October was revised down to 1,359,000 from the previously reported 1,372,000.