Global Markets Ride Higher After Major Central Banks Hold Rates Steady

Barry Adams
14 Dec, 2023
New York City

U.S. stock indexes advanced a day after the Federal Reserve held interest rates steady.

The S&P 500 index and the Nasdaq Composite struggled to hold on to the morning gains after the yield on 10-year Treasury notes eased below 4%.

Market sentiment was positive a day after the Fed held the fed funds rate range between 5.25% and 5.50% and signaled multiple rate cuts over the next two years.

The Fed's dovish stance powered the global market upswing, and the Dow Jones Industrial Average jumped 37,000, and the broader S&P 500 index traded just under 1.5% below its record high in January 2022.

 

Retail and Food Services Sales Advanced in November

U.S. retail and food services sales in November adjusted for season variation but not for price, which rose 0.3% from the previous month, the Commerce Department reported in a release Thursday.

Retail and food services sales in the month increased 4.1% from the previous year, indicating resilient consumer spending at the start of the holiday season.

Retail trade sales were up 0.1% from October and up 3.1% above last year, and sales at nonstore retailers, including online sales, were up 10.6% from last year, while food services and drinking places were up 11.3% from a year ago.

 

U.S. Indexes and Yields

The S&P 500 index gained 0.09% to 4,709.60, and the Nasdaq Composite decreased 0.2% to 14,705.64.

The yield on 2-year Treasury notes decreased to 4.33%, 10-year Treasury notes inched lower to 3.94%, and 30-year Treasury bonds eased to 4.11%.

Crude oil increased $2.92 to $72.35 a barrel, and natural gas prices rose 2 cent to $2.35 a thermal unit.

Gold increased $4.50 to $2,032.16 an ounce and extended gains for the second day in a row after the dollar declined following the Fed's rate decision and announcement to cut rates several times over the next two years. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged higher to 102.34.

 

U.S. Stock Movers

Solar stocks advanced after the Fed's signaled multiple rate cuts over the next two years. Merck and Moderna released a positive update for their experimental skin cancer vaccine. Adobe reported solid quarterly results but offered a muted 2024 outlook.

Adobe declined 3.5% to $602.0 after the company issued a lighter-than-expected revenue and earnings outlook for 2024.

Revenue in the fiscal fourth quarter ending in November rose 12% to $5.04 billion from $4.5 billion, net income advanced to $1.48 billion from $1.17 billion, and diluted earnings per share rose to $3.23 from $2.53 a year ago.

The company guided fiscal year 2024 revenue between $21.3 billion and $21.5 billion,  earnings per share between $13.45 and $13.85, and non-GAAP earnings per share between $17.60 and $18.0.

Adobe estimated fiscal first quarter revenue between $5.10 billion and $5.15 billion, GAAP earnings per share between $3.35 and $3.40, and non-GAAP earnings per share between $4.35 and $4.40.

Vir Biotechnology advanced 0.9% to $10.15 after the company announced various steps to reduce its operating expenses by at least $40 million annually.

The company said it will close its research and development facilities in St. Louis, Missouri, and Portland, Oregon, and eliminate 12%, or 75 jobs, by the first quarter.

Vir expects to incur between $30 million and $40 million in charges and recognize them through the third quarter of 2024.

Solar stocks advanced for the second day in a row after the Federal Reserve signaled multiple rate cuts in 2024 and 2025.

Enphase Energy jumped 3% on top of a 7% increase in the previous session to $110.78, and SolarEdge Technologies gained 2.3% to $84.50.

Merck edged lower by 0.3% to $106.81, and Moderna soared by 11.7% to $87.82 after the two companies released a midstage report showing experimental cancer vaccines helped to lower the risk of death or relapse in patients with skin cancer after three years.

 

European Markets Soared to Multi-year Highs After BoE and ECB Rate Decisions

European market indexes soared on Thursday, following a global market advance after the U.S. Federal Reserve held its key lending rate steady and signaled three rate cuts in 2024.

Benchmark indexes in Paris and Frankfurt traded at record highs, and in London they rebounded after the Federal Reserve estimated larger rate cuts in 2024 than previously indicated in September.

The Bank of England held for the third time in a row its key lending rate at 5.25%, but stressed higher rates may be needed for a longer time to bring down inflation.

The European Central Bank held its rates for the second time in a row at 4.0%, trimmed its 2023 economic growth outlook to 0.6% from the previous estimate of 0.7%, and lowered its inflation estimate for this year to 5.4% from 5.6% for this year.

Market indexes turned lower in the afternoon after the Bank of England said higher rates are likely to stay longer and the European Central Bank added that it plans to accelerate its plan to shrink its balance sheet.

Despite the economic slowdown in the eurozone and the UK, central banks are expected to keep interest rates at multi-decade highs in order to bring down inflation.

Bond yields fell sharply in trading today, and the yield on the German 10-year Bund declined to a low last seen in mid-January, and the yields on French, Italian, and UK bonds eased as well.

 

Switzerland Holds Rates, Norway Hikes  

The Swiss National Bank also left its policy rate unchanged at 1.75%, a second consecutive decision to hold rates in a row, and policymakers said inflation forces are weakening.

Consumer price inflation in Switzerland eased to 1.4% in November, the lowest level since October 2021.

The Norwegian central bank increased its policy rate by 25 basis points to 4.5%. 

Norges Bank Governor Ida Wolden Bache said that rates are likely to remain high "for some time ahead" because inflation is still too high despite the recent economic slowdown.  

 

Europe Indexes and Yield

The DAX index decreased 0.1% to 16,752.23, the CAC-40 index rose 0.6% to 7,575.85, and the FTSE 100 index advanced 1.3% to 7,648.98.

The yield on 10-year German bonds decreased to 2.13%; French bonds traded lower to 2.66%; the UK gilts eased to 3.79%; and Italian bonds inched higher to 3.81%.

The euro traded lower to $1.09, the British pound inched lower to $1.275, and the U.S. dollar eased to 86.51 Swiss cents.

Brent crude increased $2.77 to $77.06 a barrel, and the Dutch TTF natural gas decreased by €0.96 to €34.80 per MWh.

 

Europe Stock Movers

Air France KLM soared 6.9% to €13.04 after the international carrier reiterated its outlook for the period between 2024 and 2026 and lifted its operating margin to above 8% for the period between 2026 and 2028.

The airline's debt was rated BBB- with a stable outlook by Fitch and BB+ with a stable outlook by S&P Global Ratings.

Serco Group advanced 3.9% to 161.40 pence after the UK-based outsourcing company estimated 2024 profit to increase to £260 million.

BP plc increased 2.1% to 469.45 pence after the company denied £32.8 million in cash and stock remuneration to former chief executive Bernard Looney.

The board confirmed the immediate termination of the former chief executive after concluding an investigation that found "serious misconduct."

BP said that Looney knowingly misled board members last year when they inquired about allegations regarding his previous relationships with colleagues and assurances about his future behavior.

Looney's remuneration soared to £10 million in 2022 from £4.5 million in 2021.

Vivendi SE increased 7.8% to €9.66 after the media company announced a plan to study the separate entities as independent listed entities: Canal+, Havas, and an investment company.

Evotec SE soared 10% to €20.46 after the biotech company announced a partnership with Charité-Universitätsmedizin Berlin to create a molecular patient database for ANCA-associated vasculitis, a rare autoimmune condition that causes inflammation of blood vessels with various manifestations.