The Secret Behind the US Stock Markets’ Record-Breaking Rally
The US stock market soared to new heights on Thursday, as investors welcomed the Federal Reserve’s dovish tone and upbeat economic data. The Dow hit a record high of 37,248, while the S&P and Nasdaq also advanced. The market sentiment was driven by the Fed’s announcement that it would keep interest rates unchanged, and hinted at possible rate cuts next year. Moreover, the market was supported by strong retail sales and positive news from individual companies.
US Stock Market Highlights
The Dow added 158 points, reaching an all-time high. The S&P and Nasdaq rose by 0.3% and 0.2%, respectively. Real estate, materials, and energy sectors led the gains, while big tech stocks weighed on the market.
Moderna soared by 9.2% after reporting promising results in personalized cancer treatment trials. Rivian surged by 14% after AT&T revealed its plan to buy electric vehicles for its fleet.
Economic Indicators
Business Inventories: Total business inventories in the US declined by 0.1% month-over-month in October 2023, defying market expectations of no change. This was the first drop in business inventories after three months of increases.
Export and Import Prices: Export prices decreased by 0.9% month-over-month in November, while import prices fell by 0.4% in the same period. The data showed the difficulties in global trade, with nonagricultural export prices dropping significantly.
Unemployment Claims: The number of Americans applying for unemployment benefits declined by 19,000 to 202,000, hitting the lowest level in two months. The tight labor market gave the Federal Reserve more room to keep its terminal rate low for a longer period.
Retail Sales: Retail sales rose unexpectedly by 0.3% in November, indicating a strong start to the holiday shopping season. Various sectors, such as food services, nonstore retailers, and health and personal care, registered notable sales increases.
Housing Market and Mortgage Rates
The average rate on a 30-year fixed mortgage fell to 6.95%, the lowest since August. This was the seventh consecutive week of decline, in line with the expectations of multiple rate cuts by the Federal Reserve in 2024. Which could stimulate the housing market.
Commodity and Currency Movements
Top commodity winners included (2.62%), (2.44%), and (1.47%), with seeing a slight rise of 0.17%. The dollar index dipped below 102.4, hitting its lowest level since early August.
Global Monetary Policies and Currency Exchange
The Federal Reserve’s dovish stance contrasted with the steady rates held by the European Central Bank (ECB) and the Bank of England. Despite the better-than-expected US retail sales and the drop in weekly jobless claims, the dollar index weakened. Leading to GBPUSD reaching a 16-week high of 1.2754.
Conclusion
The US markets showed strength and optimism as they extended their rally, supported by the Fed’s easing monetary policy and positive economic data. While global trade and inflation challenges remain, the market seems to be coping with these uncertainties with a cautiously optimistic outlook. As 2023 ends, investors will keep an eye on further developments in economic indicators, corporate earnings, and central bank policies to assess the direction of the markets in the next year.
Originally published at https://www.aipt.lt on December 14, 2023.
