U.S. stocks edged mostly higher on Wednesday as Wall Street tried to build on a year-end rally, although the S&P 500 index lost momentum as it reached for a new closing record.
How stock indexes are trading
-
The Dow Jones Industrial Average
DJIA
rose 7 points, going basically flat on the day, to 37,565. -
The S&P 500
SPX
was down 2 points at 4,766. -
The Nasdaq Composite
COMP
edged up 27 points, or 0.2%, to 15,031.
On Tuesday, the Dow Jones booked a fifth straight record close, while the S&P 500 closed at its highest level since Jan. 4, 2022. In addition, the Nasdaq and Dow Jones each scored their ninth consecutive day of gains.
What’s driving markets
U.S. stocks were mostly higher on Wednesday, with the S&P 500 earlier in the trading session within sight of its all-time closing high of 4796.56, which was recorded on Jan. 3, 2022.
The large-cap benchmark S&P 500 has jumped 24.2% this year, partly powered by hopes that the U.S. economy has not been too badly damaged by the Federal Reserve’s ratcheting up of interest rates to cool inflation.
The latest leg of the rally reflects hopes that with inflation back down to 3.1%, the central bank will begin quickly trimming borrowing costs next year. Not even a concerted effort by Fed officials to counter the market’s rate-cut optimism has dampened the ardor of traders.
See: Why the 60-40 portfolio is poised to make a comeback in 2024
The current bullishness is perhaps also reflective of seasonal trends, with optimism about a festive bounce underpinning stocks. The “Santa Claus rally” period stretches from the last five trading days of the year through the first two trading days of the new year, according to the Stock Trader’s Almanac.
Since 1950, the S&P 500 has averaged a gain of 1.32% over that period and has closed higher 78.1% of the time, according to Dow Jones Market Data.
DOW JONES MARKET DATA
With stocks on a tear since the end of October amid what’s been described as an “everything rally,” Eric Sterner, chief investment officer at Apollon Wealth Management, said that “valuations are once again a bit stretched, so the market is taking a bit of a breather” on Wednesday. Apollon Wealth Management, based in Mount Pleasant, S.C., manages about $7 billion in assets.
“The tailwinds, so to speak, include the Fed’s more dovish pivot that caught the market off guard,” Sterner said via phone on Wednesday. “And on the other side, some of the headwinds are that the markets have been on an incredible run and have pushed valuations very high, historically speaking. We can debate whether there’s going to be a hard or soft landing, but we can all agree that the economy is slowing down and consumer spending is expected to slightly decrease in coming quarters.”
In U.S. economic data, existing-home sales rose 0.8% in November to 3.82 million, the National Association of Realtors said on Wednesday. Sales of previously owned homes unexpectedly inched up last month, snapping a five-month slump as easing mortgage rates encouraged some prospective home buyers.
Meanwhile, the U.S. consumer-confidence index rose to a five-month high of 110 in December, up from a downwardly revised 101 in the previous month, the Conference Board said Wednesday.
Investors will continue seeking insights from additional economic data later this week, which may provide clarity on the Fed’s interest-rate path in 2024. A revision of the third-quarter GDP print is expected Thursday morning, followed by Friday’s personal-consumption expenditures inflation report — the Fed’s preferred inflation gauge.
For 2024, the financial market “is putting a lot of weight” on a narrow scenario that includes inflation coming down, the U.S. avoiding a recession and the delayed effects of higher interest rates failing to materialize, according to Jim Besaw, chief investment officer of GenTrust, an investment-management firm with offices in Florida, New York and Puerto Rico.
“We believe inflation is unlikely to come down to the extent the market believes absent a recession, making rate cuts without a recession less likely than the market believes,” Besaw wrote in the firm’s 2024 outlook. “We also believe the odds of a recession are significantly higher than the market believes.”
Read: Sticky inflation in a key part of the U.S. economy is the biggest barrier to Fed rate cuts
Companies in focus
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Shares of Tesla Inc.
TSLA,
-0.62%
slipped 0.2% amid reports that the automaker has decided to cut out merit-based grants from employee-compensation packages. -
Class A shares of Alphabet Inc.
GOOGL,
+2.82%
jumped 3.1% on Wednesday following a Reuters report that said its Google unit plans to reorganize a large part of its advertising-sales unit. -
Shares of FedEx Corp.
FDX,
-10.95%
slumped 10.9% after the package-delivery giant trimmed its full-year sales forecast amid continued concerns about subdued shipping demand through the peak holiday season. -
Shares of General Mills Inc.
GIS,
-2.16%
were down 2.4% after the consumer-foods company missed fiscal second-quarter revenue expectations and lowered its full-year outlook as consumers continue “stronger-than-expected value-seeking behaviors.”
See: The year that wasn’t: 10 Wall Street forecasts for 2023 that didn’t pan out
Jamie Chisholm contributed.
