AI, Post-Election Euphoria, and Rate Expectations Underpin Wall Street Market Rally

Barry Adams
24 Dec, 2024
New York City

Stock market indexes retained an upward bias on Wall Street in a holiday-shortened week as investors reflect on solid gains in 2024. 

The S&P 500 index gained 0.2%, and the Nasdaq Composite advanced 0.3% in early trading amid continued rallies in tech and semiconductor stocks. 

In Monday's trading, the S&P 500 index gained 0.7%, the Nasdaq Composite advanced 1.0%, and market indexes rebounded from a 2% loss in the previous week. 

Benchmark indexes accelerated gains after the post-election results, driven in large part by the hopes of looser regulations and an easier business climate for large businesses in the energy, financial services, and tech sectors. 

However, investors are worried that higher tariffs on imported goods, especially from China, are going to contribute to inflationary forces, forcing the Federal Reserve to slow interest rate cuts in 2025. 

Investors are also overlooking the policy uncertainties of the incoming presidential administration, and key cabinet appointments are failing to inspire confidence, and top-tier and experienced professionals are avoiding joining the new administration. 

Investors are hoping that the Federal Reserve will deliver on its revised 50 basis points rate-cut estimate in 2025, but policymakers left the door open for a rate pivot if inflationary forces remain elevated. 

Consumer price inflation has slowed from its peak at 9.1% in June 2022, but prices are still rising from a higher base, forcing consumers to watch spending and curtail discretionary spending. 

For the year so far, as of Monday's close, the S&P 500 index has gained 26%, the Nasdaq Composite advanced 33.9%, and the Russell 2000 index increased 11.1%. 

President Donald Trump's second administration is going to be just as chaotic as the first one, and government shutdowns are more likely, and staff turnover is expected to remain near record high.

Trump stressed several times, while campaigning for his first and second candidacy, that he will eradicate the entire federal government debt by the end of his eight years in office. 

Despite Trump's campaign promises and extreme rhetoric, federal government debt is expected to surge to over $44 trillion, an increase of $8 trillion over the four years of administration, matching his record for the first time in the office.

Consumer price inflation has slowed from its peak at 9.1% in June 2022, but prices are still rising from a higher base, forcing consumers to watch spending and curtail discretionary spending. 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,985.50, the Nasdaq Composite rose 0.4% to 19,845.81, and the Russell 2000 index decreased by 0.2% to 2,237.44. 

The yield on 2-year Treasury notes edged higher to 4.36%, 10-year Treasury notes inched up to 4.61%, and 30-year Treasury bonds increased to 4.80%.

WTI crude oil increased $0.58 to $69.62 a barrel, and natural gas prices edged up 7 cents to $3.72 a thermal unit.

Gold decreased by $2.74 to $2,612.55 an ounce, and silver fell by $0.10 to $29.57. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher by 0.06 to 108.14 and traded at a two-year high. 

 

U.S. Stock Movers 

American Airlines Group declined 0.7% to $17.12 after the Federal Aviation Administration confirmed that the carrier grounded all U.S. flights because of a technical glitch on one of the busiest travel days of the year. 

The airline lifted the halt around 8:00 a.m. ET, and about 26 flights were canceled across the nation, but more than a thousand flights were affected, scheduled to depart after 6:00 a.m. ET.