Wall Street is ending the week on a positive note, with stocks heading toward their all-time highs and the latest economic data reinforcing speculation the Federal Reserve will start cutting rates this year.
“Overall, it was an encouraging round of data from the Fed’s perspective,” said Ian Lyngen at BMO Capital Markets.
The S&P 500 erased this week’s losses and the tech-heavy Nasdaq 100 rose about 1%. Chipmakers once again led gains, with Texas Instruments Inc. up 3.5% and Advanced Micro Devices Inc. heading toward a record. Megacaps also pushed higher, though Tesla Inc. struggled. Treasury 10-year yields were little changed.
The stocks that led the rally in 2023 are again traders’ top picks, according to Bank of America Corp.’s Michael Hartnett, who says investors are reverting to owning growth, technology, the “AI bubble” and the so-called Magnificent Seven.
While US shares saw redemptions at $4.3 billion in the week through Jan. 17, tech-stock funds saw the biggest two-week inflow since August at $4 billion, BofA said, citing EPFR Global data.
“Bottom line, we’re off the bullish boil and the boat is less full, but it’s still leaning firmly positive,” said Peter Boockvar, author of the Boock Report.
Semiconductor shares got a boost this week from a bullish forecast Taiwan Semiconductor Manufacturing Co., which bolstered prospects for the tech industry in 2024.
Traders also kept a close eye on remarks from central bank officials. Fed Bank of Chicago President Austan Goolsbee said a continued decline in inflation would merit discussion of cutting rates, though he stressed the central bank will make decisions meeting-by-meeting. He spoke just hours before the Fed’s traditional pre-meeting communications blackout period.
Markets are overpricing the pace and amount of Fed-rate cuts as they are overlooking stubbornly high inflation, according to economist Mohamed El-Erian.
“I do think that we get to the pivot, but relative to what the market expects, it won’t be as fast or as deep,” said El-Erian, president of Queens’ College, Cambridge, and a Bloomberg Opinion columnist.
Traders have tempered their wagers on rate cuts as US economic data continued to show resilience and Fed officials emphasized they want to ensure inflation is tamed before embarking on any cuts. Markets are now pricing in about 1.4 percentage points of reductions this year, compared with expectations of as much as 1.7 percentage points of easing as recently as last week.
Policymakers penciled in three rate cuts in projections released after their December gathering. The Fed, which left interest rates unchanged last month, is anticipated to keep rates in a range of 5.25% to 5.5% for a fourth straight meeting when they convene Jan. 30-31.
- Apple Inc. vowed to open up its coveted tap-to-pay technology on iPhones to rivals in a bid to sidestep potentially massive European Union antitrust fines.
- Amazon.com Inc.’s proposed $1.4 billion acquisition of Roomba maker iRobot Corp. is expected to be blocked by the European Union’s antitrust regulator over concerns that the deal will harm other robot vacuum makers.
- Ford Motor Co. cut production of its F-150 Lightning electric truck amid fading demand for electric vehicles.
- Spirit Airlines Inc. said its deal with JetBlue Airways Corp. “remains in full force and effect” as the carrier explores ways to shore up its liquidity, offering investors a measure of relief after a federal judge blocked the multibillion-dollar buyout.
- J.B. Hunt Transport Services Inc. hauled more containers of freight than Wall Street expected in the fourth quarter, suggesting the sector may be recovering after a bad year.
- SLB will raise its payout to shareholders by 10%, marking the highest dividend since 2020, as a ramp-up in drilling outside of North America buoyed results for the world’s biggest oil-field contractor.
- Ally Financial Inc. announced fourth-quarter results that topped analysts’ estimates and said it will sell a point-of-sale financing business that includes $2.2 billion of loan receivables to Synchrony Financial.
- Comerica Inc. said net interest income will probably slide 11% this year and reported a plunge in fourth-quarter profit on a series of one-time charges.
Some of the main moves in markets:
- The S&P 500 rose 0.5% as of 12:04 p.m. New York time
- The Nasdaq 100 rose 0.9%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index rose 0.5%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0884
- The British pound fell 0.3% to $1.2671
- The Japanese yen was little changed at 148.18 per dollar
- Bitcoin fell 1.7% to $40,365.45
- Ether fell 1.2% to $2,424.95
- The yield on 10-year Treasuries advanced two basis points to 4.16%
- Germany’s 10-year yield was little changed at 2.34%
- Britain’s 10-year yield was little changed at 3.93%
- West Texas Intermediate crude fell 0.9% to $73.41 a barrel
- Spot gold was little changed