4:05pm: Tech-heavy index on an eight-day winning streak
US stocks ended the day higher as the Santa Claus rally continued.
At the close, the Dow rose a single point to 37,306, while the S&P 500 added 21 points at 4,741 and the tech-heavy Nasdaq gained 91 points to 14,905.
"It’s a continuation of what we’ve seen throughout much of the month and that is, inflation seems to be coming down, and interest rates are trending lower and earnings, to this point, have stabilized," US Bank Wealth Management chief equity strategist Terry Sandven said.
Notable movers included shares of United States Steel Corp, which surged 26% after Japan’s Nippon Steel said it would buy the company in a deal valued at nearly $15 billion.
12:00pm: Markets advance despite best efforts of the Fed
Stocks continued to forge ahead despite two more Federal Reserve officials pushing back against market hopes for an early cut in interest rates in 2024.
At midday, the Dow Jones Industrial Average was up 63.13 points, 0.2%, at 37,368.29, the S&P 500 was up 21.77 points, 0.5%, at 4,740.96 and the Nasdaq Composite was up 63.59 points, 0.4%, at 14,877.51.
Chicago Fed President Austan Goolsbee said he was surprised by the outsize market reaction to the Fed’s updated quarterly economic projections last week.
“I was confused a bit with the - was the market just imputing, ‘here’s what we want them to be saying?’” Goolsbee said Monday in an interview on CNBC.
“I thought there seemed to be some confusion about how the FOMC even works. We don’t debate specific policies speculatively about the future.”
Cleveland Fed President Loretta Mester said in an interview with the Financial Times that markets had gotten “a little bit ahead” of the central bank by betting on early interest-rate cuts in 2024.
9:46am: S&P 500 continues to forge ahead
Stocks opened higher on Monday as the end of year winning streak continued in New York.
Shortly after the opening bell, the Dow Jones Industrial Average was up 29.47 points, 0.1%, at 37,334.63, the S&P 500 was up 14.29 points, 0.3%, at 4,733.48 and the Nasdaq Composite was up 31.63 points, 0.2%, at 14,845.55.
The bullish market tone came despite Federal Reserve officials pushing back on market expectations of early interest rate cuts in 2024.
In company news, Adobe rose 2.6% after it and design software maker Figma agreed to mutually terminate their merger pact.
US Steel leapt 26% after being bought by Nippon Steel in a $14.1 billion deal while Illumina rose 1.1% after announcing it will sell Grail, the cancer test developer it had acquired in a $8 billion deal in 2021, due to regulatory opposition.
The acquisition had faced stern opposition from competition regulators in the US and the EU.
Elsewhere, oil prices jumped more than 2% as attacks by militants based in Yemen on Red Sea shipping disrupts shipping through the crucial waterway.
BP became the latest company on Monday to pause shipping through the Suez Canal after a series of attacks by Houthi militants on vessels.
7:00am: Stocks expected to open higher
Stocks look set to open higher as investors continue to bet on interest rate cuts in early 2024 despite the Fed’s best efforts to rein in some of the optimism.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 were 0.2% higher and contracts for the Nasdaq 100 futures climbed 0.1%.
On Friday, all three major indices closed higher.
The winning streak for the S&P 500 marked its longest string of weekly gains since 2017, the Dow posted an intraday record and the Nasdaq100 had a new closing high.
Henry Allen at Deuutsche Bank noted despite the push back by New York Fed President Williams and Atlanta Fed President Bostic on Friday markets are still pricing in a reasonably aggressive pace of rate cuts taking place next year.
He pointed out there are now more than 150bps of cuts priced in between the January 2024 and January 2025 meetings.
Allen noted that to get cuts that quickly, history suggests you probably need a recession while if the economy does manage to hold up better than expected, then the alternative risk is that markets don’t see the amount of cuts they’re currently pricing in.
How that question resolves itself will be a key issue in 2024 in Reid’s opinion.
Allen explained it’s not the first time that markets have got excited about a dovish pivot.
“We’ve counted six other times before in this cycle where markets saw a noticeable rally, before being disappointed as the Fed stayed hawkish,” he said.
Stocks on the move include US Steel, up more than 23% in pre-market, after the steelmaker agreed to be bought out by Japan’s Nippon Steel for $55 per share in cash.
The deal values US Steel at $14.9 billion in total enterprise value.