The stocks rose again on Tuesday, leading several indices to record highs as the closely watched S&P 500 approached its all-time high, with the market heading towards the end of 2023 thanks to significantly shifting expectations for monetary policy, although those responsible for this policy at the Federal Reserve have not moved much publicly.
Main Facts
The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all saw nearly a 0.6% increase in Tuesday’s trading, resulting in a new closing record for the Dow and the S&P and Nasdaq heavy technology indices hitting their highest closes since January 2022.
At 4768.37, the S&P is now just 0.6% away from its all-time high of 4796.56 reached on January 6, 2022.
The core index has risen 16% since hitting its lowest point in late October, as it rode a continuous wave of optimism about the direction of interest rates to significant gains, culminating in last week’s reveal by the Federal Reserve that it expects to cut interest rates by 75 basis points next year.
In fact, investor optimism has reached its highest level since the Federal Reserve began raising interest rates last year, according to the Bank of America Fund Managers Sentiment Survey, where respondents indicated they have the largest exposure to stocks since February 2022 and the lowest exposure to cash since April 2021, reflecting an increasingly risk-on environment.
Key Criticism
The rise in stocks may be due to the belief that the Federal Reserve is more friendly, but central bank officials have said little publicly to indicate a definitive warm shift. Austin Goolsbee, president of the Chicago Fed branch and a member of the Federal Open Market Committee, said in an interview with CNBC on Monday that it is “distracting” why the stock markets interpreted last week’s Fed meeting so positively and wondered if investors are “just interpreting” what they want the central bank to say.
The Big Number
3.93%. This is the yield on the 10-year U.S. Treasury bond on Tuesday, down more than 100 basis points from the 5% peak in October. These yields, which move in the direction of long-term market expectations for interest rates, were around 1.4% two years ago, before the Fed’s most aggressive interest rate hike campaign began last March, disrupting the bond market (bond values move inversely to yields).
Astonishing Fact
Nvidia, a leader in artificial intelligence, was the second worst-performing stock in the S&P on Tuesday, according to FactSet data. Nvidia’s shares, which remain the biggest winners in the S&P for 2023, fell by 2% compared to the S&P’s rise of 5% over the past month.
For more information, read the following articles:
– S&P 500, Dow Post Longest Weekly Winning Streaks Since Before The Pandemic
– Dow Surges To Record High Amid Interest Rate Optimism Following Fed Report
– Nvidia Is This Year’s Hottest Stock. So Why Are Analysts Disappointed By Its 230% Gain?
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