Prospects of Wider Conflict In the Middle East Keep Oil Volatile, U.S. Stocks Retain Upward Bias

Barry Adams
27 Dec, 2023
New York City

Stocks rested in Wednesday's trading, and benchmark indexes hovered near recent highs.

The S&P 500 index traded less than 0.5% from its peak, and the Nasdaq 100 index closed at a new high in the previous session.

Crude oil was in focus amid rising tensions in the Middle East, and traders grappled with a wider fallout in the region after the U.S. military targeted Iran-backed rebels' installations in Iraq.

Iran-backed Houthi rebels continued their attacks on ships traveling in the Red Sea as the conflict between Hamas and Israel showed no sign of ebbing.

Benchmark indexes are likely to close higher in the final week of 2023 and extend their rally to the ninth week in a row as tech stocks lead market gainers.

Market indexes in the U.S. advanced 0.5% in Tuesday's trading, and investors bid up stocks in the hopes of a rate cut as early as March.

The Federal Reserve is widely anticipated to leave rates steady after the first policy meeting in 2024 at the end of January, but investors are hoping that the policymakers may begin to ease in March.

The rate-cut optimism is largely driven by the steady decline in overall inflation, powered by the fall in energy prices from higher base prices.

Moreover, the Federal Reserve is signaling that the lagging effect of the 500 basis point rate increase since March 2022 has still not been felt by the wider economy.

Investors are hoping that the Federal Reserve will be able to bring down inflation to its target rate of 2% while keeping the economy growing at 2% without significantly increasing unemployment.

 

U.S. Indexes and Yields

Benchmark indexes continued their advance in December and in the fourth quarter.

In December, the S&P 500 advanced 4.5% and the Nasdaq Composite gained 6%, and in the fourth quarter, the indexes gained 11.4% and 14%, respectively.

In Wednesday's trading, the S&P 500 index gained 0.03% to 4,768.13, and the Nasdaq Composite increased 0.02% to 15,041.07.

The yield on 2-year Treasury notes increased to 4.29%, 10-year Treasury notes inched higher to 3.86%, and 30-year Treasury bonds eased to 4.01%.

WTI crude oil decreased $1.41 to $74.20 a barrel, and natural gas prices increased 6 cents to $2.48 a thermal unit.

Gold advanced $0.56 to $2,067.18 an ounce and extended this year's gains to 14.6%.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 101.37.

 

U.S. Stock Movers

Ascent Industries soared 10% to $8.92 after the company said it agreed to sell its carbon steel pipe and tubing business for $55 million.

The company plans to use some of the proceeds to pay down debt.

Coherus Biosciences soared 34.7% to $2.94 after the company won approval from the Food and Drug Administration for its UDENYCA ONBODY injection system for patients using chemotherapy to prevent infection.

China-based online gaming companies were in focus after a Chinese regulator said it plans to "further modify and improve" a recently released proposal to curb excessive gaming.

NetEase declined 4% to $88.68, and Tencent Holdings ADR decreased 2.7% to $36.71.

The New York Times traded at $46.11, and the publishing company sued Microsoft and the parent company of ChatGPT operator Open AI for infringing on its copyright and using its intellectual property without its permission.