Wall Street is hanging around its record highs on Friday and on track to close out its longest weekly winning streak in six years. The S&P 500 was 0.1% lower in morning trading and within 1.7% of its all-time high set early last year. It’s still heading for a seventh straight winning week.
Quick Read
- Record Highs on Wall Street: Wall Street is near its record highs, with the S&P 500 close to its all-time high set early last year. The index is on track for a seventh consecutive winning week, its longest streak in six years.
- Morning Trading Trends: In morning trading, the S&P 500 was slightly down by 0.1%, the Dow Jones Industrial Average dropped 66 points (0.2%), and the Nasdaq composite rose by 0.3%.
- Restaurant Chains’ Stock Performance: Stocks of restaurant chains like Olive Garden and Ruth’s Chris Steak House, under Darden Restaurants, fell by 2.2% despite reporting higher-than-expected profits. The decline was due to their revenue forecast falling short of expectations.
- Costco’s Stock Surge: Costco’s shares increased by 3.5% following a report of strong quarterly results and an announcement of a special $15 dividend, amounting to a total cash distribution of $6.7 billion to shareholders.
- Federal Reserve’s Influence: The market rally this week was spurred by the Federal Reserve’s indications that inflation may have cooled enough to halt interest rate hikes and possibly consider rate cuts. Fed Chair Jerome Powell’s recent statements have fueled these expectations.
- Bond Market and Treasury Yields: Treasury yields have dropped, with the 10-year yield falling to 3.91%. Lower yields in the bond market reduce pressure on stocks.
- Global Rate Cut Predictions: Bank of America forecasts 152 rate cuts by central banks globally in 2024, which would be the first year since 2020 with more rate cuts than hikes.
- Investor Optimism and Caution: While there’s growing investor optimism, some caution that the markets might be getting ahead of themselves, banking heavily on the Federal Reserve’s precise management of interest rates to control inflation without triggering a recession.
- Inflation and Economic Growth Concerns: The Fed aims to balance inflation control with economic growth. However, lower interest rates and rising stock prices can stimulate spending, potentially increasing inflation.
- Preliminary Business Activity Report: A preliminary report showed a possible increase in U.S. business activity, attributed to “looser financial conditions” or lower interest rates.
- Global Stock Market Trends: Hong Kong’s Hang Seng index surged, particularly with property developer stocks, after some Chinese cities eased buying restrictions. Generally, global markets have been strong in 2023, driven by hopes of cooling inflation and anticipated interest rate cuts.
The Associated Press has the story:
Wall Street hangs near records, heads toward a 7th straight winning week
Newslooks- NEW YORK (AP)
Wall Street is hanging around its record highs on Friday and on track to close out its longest weekly winning streak in six years.
The S&P 500 was 0.1% lower in morning trading and within 1.7% of its all-time high set early last year. It’s still heading for a seventh straight winning week.
The Dow Jones Industrial Average, which shows the health of a smaller slice of the U.S. stock market, was down 66 points, or 0.2%, a day after setting a record for the second straight time. The Nasdaq composite was 0.3% higher, as of 10 a.m. Eastern time.
The company behind Olive Garden, Ruth’s Chris Steak House and other restaurant chains sank 2.2% despite reporting stronger profit for the latest quarter than analysts expected. Darden Restaurants gave a forecast for revenue for its full fiscal year that fell short of analysts’ forecasts.
A 3.5% gain for Costco helped offset that weakness. It rose after reporting stronger results for the latest quarter than analysts expected and saying it will send $6.7 billion in cash to its shareholders through a special $15 dividend.
Stocks overall have bolted higher this week after the Federal Reserve seemingly gave a nod toward the hopes that have sent Wall Street screaming higher since autumn. Fed Chair Jerome Powell at a press conference on Wednesday did not forcefully push back on traders’ expectations that inflation has cooled enough for the central bank to not only halt its market-hurting hikes to interest rates but to consider cutting rates.
The S&P 500 has jumped roughly 15% since late October on rising hopes for just such a shift. Lower rates not only give a boost to prices for all kinds of investments, they also relax the pressure on the economy and the financial system.
Hopes for several cuts to rates from the Fed in 2024 have sent Treasury yields tumbling in the bond market, which in turn releases pressure on the stock market.
The 10-year yield stabilized a bit on Friday and edged down to to 3.91% from 3.92% late Thursday. It was above 5% in October and at its highest since 2007.
With inflation down from its peak, Bank of America is forecasting 152 rate cuts from central banks around the world in 2024. That would be the first year since 2020 that cuts have outpaced hikes.
Of course, some more cautious investors say markets have gotten ahead of themselves in their ebullience. The big moves seem to be predicated on the Federal Reserve pulling off what was considered a nearly impossible task not long ago.
The Fed’s goal has been to slow the economy and grind down prices for investments enough through high interest rates to get high inflation under control. It then has to loosen the brakes at the exact right time. If it waits too long, the economy could fall into a painful recession. If it moves too early, inflation could reaccelerate and add misery for everyone.
That’s a lot of ifs. Plus, many critics say the number of rate cuts that traders are expecting in 2024 doesn’t seem likely unless the U.S. economy falls into a recession.
With the huge rallies so far, “markets all-in on infallible Fed,” strategist Michael Hartnett wrote in a BofA Global Research report.
Those rallies may also be threatening the very futures investors are banking on. Lower Treasury yields and higher stock prices can encourage businesses and households to spend more, which keeps the economy strong but can add upward pressure on inflation.
A preliminary report on Friday indicated growth for U.S. business activity may be ticking higher. It cited “looser financial conditions,” which is another way of describing lower interest rates that encourage businesses and people to spend.
“Looser financial conditions have helped boost demand, business activity and employment in the service sector, and have also helped lift future output expectations higher,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Williamson also said a measure of pressure on inflation “remains sticky but at a level which is indicative of” inflation at the consumer level running only modestly above 2%. The Fed’s goal is to keep inflation at roughly 2% while maximizing the job market.
In stock markets abroad, Hong Kong’s Hang Seng index jumped 2.4%, with stocks of property developers rising after some Chinese cities eased buying restrictions. The Hong Kong market has been one of the world’s worst this year on worries about property developers and the overall health of the Chinese economy.
Most other markets around the world have been strong in 2023 amid hopes for cooling inflation and anticipation for cuts to interest rates.
