S&P 500 Trades Within A Whisker Of All-Time High: Markets Wrap

(Bloomberg) -- Wall Street kicked off the final week of 2023 with gains in stocks, extending a rally that put the market on the brink of a record.

In a session marked by low volume, the S&P 500 traded about 0.5% away from its all-time high of 4,796.56. Despite warnings about overbought levels and stretched positioning, equities continued to power ahead on bets the Federal Reserve will cut rates as early as March.

“The focus will quickly pivot to whether the market will be able to sustain its momentum into the New Year, and that may depend on how long the good vibes surrounding potential Fed rate cuts last,” said Chris Larkin at E*Trade from Morgan Stanley.

The so-called Santa Claus rally, which typically encompasses the last five trading sessions of the year and the first two of the new one, has a pretty strong record. Since 1969, the S&P 500 has averaged a gain of 1.3% over the seven-day period, according to the Stock Trader's Almanac.

The S&P 500 rose to 4,774.75 after completing its longest weekly winning run since 2017. A gauge of chipmakers hit a record, with Intel Corp. up over 5%. The Russell 2000 of small caps added 1.2%.

To Adam Turnquist at LPL Financial, consistent buying pressure on stocks of such magnitude is not only rare, but a bullish sign for improving investor sentiment and market momentum. 

“And while all winning streaks eventually end, history suggests the rally may not,” he noted.

Should the S&P 500 complete a ninth straight week of gains, it will be its longest winning run since 2004.

Since 1957, nine of the gauge's 17 previous eight-week winning streaks pushed to a ninth week, but only three of those made it to 10 weeks, according to Larkin at E*Trade from Morgan Stanley.

Riding the Rally

Craig Johnson at Piper Sandler says that any pullbacks will be modest and short-lived as investors follow the eight-week uptrend toward new highs.

“It still appears likely that we can end the year at the highs,” said Louis Navellier, chief investment officer at Navellier & Associates. “No reason to not ride this market through the end of the year.” 

Stock volumes were down across the board, with trading in countries such as Canada, New Zealand and Australia shut. European markets were closed too.

In corporate news, Apple Inc. is appealing a US sales ban of its smartwatches as the White House refused to overturn the measure. Intel will invest a total of $25 billion in Israel after winning incentives. FedEx Corp. entered into an accelerated share repurchase agreement with Mizuho Markets Americas. Bristol Myers Squibb Co. agreed to buy RayzeBio Inc. for about $4.1 billion.

Locking In Higher Yields

Buyers piled into Treasury sales Tuesday, seeking to lock in higher yields as the market prices in an aggressive path of Fed interest-rate cuts in 2024.

Indirect bidders, a group that includes foreign central banks, grabbed a record 77.6% of the 52-week bill auction, and the same category took 71.6% of the department's six-month offering, the third-largest share ever. Meanwhile, a sale of two-year debt priced below its when-issued yield, a sign of greater-than-expected demand.

Swap contracts tied to Fed meetings imply an over 90% probability the US central bank brings down its current 5.25% to 5.5% target rate range down in March. Across 2024, traders are penciling in nearly 160 basis points of rate reductions — more than twice as much as Fed officials signaled earlier this month in their new round of quarterly forecasts.

Elsewhere, oil rose as shipping disruptions in the Red Sea continued to a spate of Houthi attacks against vessels in the vital waterway. Bitcoin fell and the recent rally in memecoins started to show signs of stalling.

The economic calendar is thin this week, with home prices rising for a ninth straight month. Early data from Mastercard SpendingPulse showed US holiday retail sales rose at a much slower pace than in 2022.

Key events this week:

• China industrial profits, Wednesday
• Bank of Japan issues Summary of Opinions from December monetary policy meeting, Wednesday
• Japan industrial production, retail sales, Thursday
• US wholesale inventories, initial jobless claims, Thursday
• UK Nationwide house prices, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4% as of 4 p.m. New York time
• The Nasdaq 100 rose 0.6%
• The Dow Jones Industrial Average rose 0.4%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.1041
• The British pound rose 0.3% to $1.2726
• The Japanese yen was little changed at 142.43 per dollar

Cryptocurrencies

• Bitcoin fell 3.2% to $42,135.36
• Ether fell 2.5% to $2,215.6

Bonds

• The yield on 10-year Treasuries was little changed at 3.89%

Commodities

• West Texas Intermediate crude rose 2.3% to $75.22 a barrel
• Spot gold rose 0.7% to $2,068.22 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Esha Dey, Jessica Menton, Felice Maranz, Elena Popina, Tugce Ozsoy, Carter Johnson and Liz Capo McCormick.

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.