US stocks opened the final trading week of 2023 on a positive note, buoyed by a year-end rally that has injected optimism into the market. The momentum, fueled by growing confidence in a soft landing and positive outlooks for 2024, propelled major indices to higher ground.
At the closing bell on Tuesday, the Dow Jones Industrial Average (^DJI) rose by 0.4%, gaining approximately 150 points. The benchmark S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) also posted gains of 0.4% and 0.5%, respectively.
Notably, all three major indexes have recorded double-digit gains for the year, with the Nasdaq leading the pack with year-to-date gains exceeding 40%. The S&P 500 finished within striking distance of its all-time record, ending the day less than 30 points shy of the 2022 high of 4,796.56.
The surge in stocks comes amid widespread expectations on Wall Street that the Federal Reserve is poised to conclude its tightening campaign. This development signals a decisive and positive turn in the central bank’s battle against inflation, which dominated concerns at the beginning of the year.
The narrative that started with worries about pricing pressures and potential consequences of the Fed raising interest rates has evolved. As the year draws to a close, discussions have shifted to the prospect of rate cuts, surprise at the cooling of inflation, and the resilience of the job market. Despite initial concerns, unemployment remains below 4%.
Looking ahead to 2024, challenges loom, and uncertainties persist. The anticipated recession that failed to materialize in 2023 could still pose a threat. Fed Chair Jerome Powell has emphasized the fluidity of rate-cutting timing, highlighting the possibility of adjusting policy based on economic conditions. If the economy stages a robust comeback, there could be additional rate hikes or a delay in rate cuts.
Chris Zaccarelli, Chief Investment Officer for the Independent Advisor Alliance, commented, “Most of 2023 has been about the resilient consumer and waiting for a recession which never came, but we think 2024 is going to be much more about inflation going back to target in a sustainable way or inflation getting ‘stuck’ and forcing the Fed to cut much less than the market expects.”
A significant portion of the stock market’s growth in 2023 is attributed to the robust performance of major tech companies, notably the Magnificent Seven. Apple (AAPL) and Microsoft (MSFT) have seen their shares rise by around 50% year-to-date, surpassing the S&P’s 24% gains. Meta (META) has nearly tripled its share price, marking an impressive reversal, while Nvidia (NVDA) has surged by nearly 240%.
In corporate news on Tuesday, Intel (INTC) witnessed a gain of more than 4% after confirming securing over $3 billion in incentives from the Israeli government for expanding wafer fabrication in the country.
Fresh real estate data painted a picture of a competitive U.S. housing market, with buyers driving prices higher amid tight supply. According to the S&P CoreLogic Case-Shiller home price index published on Tuesday, national home prices rose by 4.8% in October compared to the same month last year. The 10-City Composite showed a 5.7% increase, up from the previous month’s 4.8%, and the 20-City Composite posted a 4.9% year-over-year increase, up from a 3.9% increase in the previous month.
Brian Luke, Head of Commodities, Real and Digital Assets at S&P Dow Jones Indices, noted, “US home prices accelerated at their fastest annual rate of the year in October. We are experiencing broad-based home-price appreciation across the country, with steady gains seen in 19 of 20 cities.”
As the curtain falls on the first day of the final trading week of 2023, the resounding surge in stock prices encapsulates the year-end rally, leaving investors with a sense of optimism and anticipation for the market landscape in the coming year.
Source: Yahoo Finance
