U.S. Major Averages Trend Higher Overlooking Cautious Comments from Policymakers

Barry Adams
18 Dec, 2023
New York City

U.S. benchmark indexes edged higher and extended their gains from the previous week, and the dollar index continued to drift lower.

The S&P 500 index and the Nasdaq Composite advanced despite cautious comments from policymakers across the Atlantic on rate outlooks.

Policymakers ramped up comments to push back market enthusiasm about possible sooner-than-expected rate cuts as early as March 2024 and stressed that inflation is still too high.

New York Fed president John C. Williams said talks of rate cuts as early as March seem premature, tempering market bets on imminent rate cuts.

Federal Reserve Bank of Chicago president Austan Goolsbee said in an interview with CBS on Sunday that it is too early to declare victory over inflation and that interest rate decisions would depend on incoming data.

European Central Bank Governing Council member and president of Bundesbank Joachim Nagel said Friday that the central bank has probably concluded its hiking stance, but it's still too early to talk about lower borrowing costs.

Members of the European Central Bank, Philip Lane and Isabel Schnabel, as well as Governor of the Bank of England Ben Broadbent, are anticipated to share their opinions later in the day. 

Investors have stepped up bidding for stocks, and the broader S&P 500 index is up 3.3% in December, and the Nasdaq is ahead by 4.1%.

Market sentiment was bolstered last week after the Federal Reserve suggested that three rate cuts totaling 75 basis points are likely in 2024. 

Despite the pushback from policymakers on Friday and over the weekend, market enthusiasm for stocks remained.

Cooling inflation, slowing but steady economic growth, and higher-than-expected job gains are expected to contribute to consumer spending resilience and corporate earnings growth.

 

U.S. Indexes and Yields

The S&P 500 index gained 0.2% to 4,772.23, and the Nasdaq Composite increased 0.09% to 14,683.15.

The yield on 2-year Treasury notes increased to 4.43%, 10-year Treasury notes inched lower to 3.90%, and 30-year Treasury bonds eased to 4.01%.

Crude oil increased $0.70 to $72.12 a barrel, and natural gas prices increased 8 cents to $2.57 a thermal unit.

Gold increased $3.30 to $2,021.98 an ounce and extended gains for the third 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 lower to 102.57 and extended the previous week's loss of 1.4% and the loss of 0.9% in the year so far.

 

U.S. Stock Movers

U.S. Steel Corporation surged 28.2% to $50.33 after the steelmaker accepted the $55 per share offer from Japan-based Nippon Steel in cash.

The offer values the steel company at $14.9 billion in enterprise value, and the deal is expected to close in the second or third quarter of 2024.

Southwest Airlines declined 0.4% to $28.90, and the company reached a $140 million agreement, including a $35 million fine.

The fourth-largest U.S. airline by revenue settled a federal investigation for thousands of flight cancellations and stranding 2 million passengers after heavy snowstorms in Denver and Chicago in December 2022.

The U.S. Department of Transportation said the total charges are the largest it has ever imposed on an airline for violating consumer protection laws.

Before the government's assessment, Southwest said that the reservation system meltdown cost the airline about $1.1 billion in refunds, reimbursements, lost revenue over several months, and additional costs.