Market Summary – December 18, 2023

Last Week’s Summary

  • S&P 500 Index rose 2.52%
  • International Equities rose 2.61%
  • Emerging Markets rose 2.70%
  • U.S. 10-Year Treasury Yield fell to 3.95%
  • FOMC kept rates at 5.25-5.50%
  • Initial Jobless Claims fell to 202k
  • CPI fell to 3.1%; Core remained at 4.0%
  • PPI fell to 0.9%; Core fell to 2.0%

What to Watch for This Week

  • M, 12/18/23 NY Fed Services Business Activity
  • T, 12/19/23 Housing Starts
  • W, 12/20/23 MBA Mortgage Applications, Existing Home Sales
  • Th, 12/21/23 GDP, Initial Jobless Claims
  • F, 12/22/23 PCE Core, Personal Income/Spending, U. of Mich. Sentiment

Weekly Market Recap

This week, Wall Street enthusiastically embraced both stocks and bonds following Federal Reserve Chair Jerome Powell’s assurance of the central bank’s readiness to implement rate cuts.

In a significant shift, policymakers opted to maintain the benchmark rate, signaling a departure from any further hikes and outlining plans for three rate cuts in the upcoming year.

While this shift in rhetoric has caused some concern from the market, with those believing the market is overly optimistic now and could lead to a sudden pullback in risk-assets, the majority of participants are betting on the Fed’s new dovish stance and calling for rate cuts to come earlier and faster in the new year.

The market is currently pricing between three to six 25-basis point rate cuts throughout 2024. This shift contributed to the Nasdaq 100 achieving an unprecedented peak, marking the first occurrence in two years. The S&P 500 and the technology-focused index sustained Seven-Week winning streaks, propelled by the Federal Reserve’s policy reversal.

Concurrently, the dollar rebounded from a Three-Day decline against G7 currencies. The yield on the 10-Year bond, a pivotal measure influencing everything from mortgages to corporate debt, dipped below 4% for the first time since August, while the Two-Year rate reached 4.45%. In commodities, oil closed higher and climbed from a Five-Month low, rallying with the broader markets.

As market participants gear up for the final full week of the year leading into the Christmas holiday, focus turns to the Fed’s preferred inflation indicator, the PCE, scheduled for release-serving as a concluding benchmark for major financial updates in 2023.

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