U.S. Indexes Slip Second Day as 5-week Strong Market Rally Paused

Barry Adams
05 Dec, 2023
New York City

Benchmark indexes rested for the second day in a row as investors reassessed the economic outlook and the appropriate level of interest rates in early 2024.

Investors stayed on the sidelines ahead of the widely anticipated rate-pause decision next week, but the ongoing debate raged on Wall Street centered on the direction of interest rates.

One group of investors is supporting the view that interest rates are near peak rates and the Federal Reserve is more likely to cut rates as early as the second quarter of 2024.

The other group of investors is looking for the central bank to hold higher rates for longer and worries that despite the eleven rate hikes between March 2022 and June 2023, prices are still rising faster than the 2% target rate set by the Federal Reserve.

Federal Reserve Chairman Jerome Powell stressed last Friday that talks of rate cuts are "premature" and inflation has a long way to go.

The Federal Reserve is engaged in a delicate balancing act of keeping economic growth intact while lowering inflation to 2% with a minimal impact on the labor market.

Overall inflation declined from a high of 9% in late 2022 to below 3% in recent months, largely because of the decline in energy prices and not because of multiple rate hikes by the central bank.

 

U.S. Indexes and Yields

The S&P 500 index declined 0.2% to 4,565.03, and the Nasdaq Composite decreased 0.3% to 14,240.12.

The yield on 2-year Treasury notes increased to 4.63%, 10-year Treasury notes inched lower to 4.23%, and 30-year Treasury bonds decreased to 4.39%.

Crude oil decreased $0.04 to $72.98 a barrel, and natural gas prices rose 2 cents to $2.71 a thermal unit.

Gold decreased $4.15 to $2,025.87 an ounce on the expectation of a decline in interest rates as early as in the second quarter of 2024 and a weakening of the U.S. dollar.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.79.

 

U.S. Stock Movers

Gitlab soared 14.2% to $60.44 after the software developer reported better-than-expected quarterly results and the company reported adjusted operating profit for the first time.

Lands End rose 1.5% after dropping as much as 9% to $6.75 after the apparel retailer reported weaker-than-expected quarterly results.

J.M. Smucker advanced 2.6% to $115.34, and the stock lacked direction after the food maker lowered its annual expectations after revenue plunged 12% from a year ago.

The company tightened the upper end of its comparable sales estimate and lowered its view of free cash flow and adjusted earnings per share.