Thursday, November 30, 2023

S&P 500 closes lower on conflicting Fed signals

Wednesday saw a slight decline in US stocks as concerns about a recession were allayed by a strong upward revision to GDP, but comments made by Federal Reserve members cast doubt on how long the central bank would maintain its tight stance.

In anticipation of Thursday's pivotal personal consumption expenditure (PCE) inflation report, investors adopted a wait-and-see attitude, causing the Nasdaq to join the S&P 500 in negative territory while the Dow finished slightly higher.

November has been a great month, notwithstanding the indexes' sluggish performance over the last three sessions. It looks like the S&P 500 will have its largest monthly percentage rise since July 2022.

According to Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, "there's definitely profit taking and repositioning; there's some consolidation going on here" because of the market's enormous returns. "There is a lot of hope, and we've got extremely great earnings. And as a result, gains have been reallocated."

Unlike Barkin, however, Fed governor Christopher Waller—who is regarded as a hawk—reassured on Tuesday that the Fed has most likely reached the end of its cycle of rate hikes. In order to create a "soft landing" and prevent a recession, he made a passing reference to the potential for rate cuts in the near future.

S&P 500 closes lower on conflicting Fed signals

"The Fed's on hold now, but the mantra is still higher for longer," said Ghriskey. "The economy is still comparatively robust. The Fed has no justification for cutting rates and running the risk of inflation returning."

In fact, Loretta Mester, head of the Cleveland Fed, reaffirmed on Wednesday the need for the central bank to continue to be "nimble" in its reaction to economic data.

The Commerce Department revised upward its initial estimate of the third-quarter GDP earlier in the session, highlighting the resilience of the US economy while also seeming to give the Fed little reason to begin reducing rates anytime soon, so long as inflation stays well above its target of 2%.

Midway through the day, the Federal Reserve released its Beige Book, a snapshot of the US economy by area. It revealed that, as a result of the central bank's tight monetary policy, economic activity has somewhat slowed.

The S&P 500 lost 4.31 points, or 0.09%, to 4,550.58, the Nasdaq Composite fell 23.27 points, or 0.16%, to 14,258.49, and the Dow Jones Industrial Average increased 13.44 points, or 0.04%, to 35,430.42.

Real estate and finance recorded the biggest percentage gains among the S&P 500's 11 major sectors, while communications services saw a 1.1% decline.

The largest weights on the S&P 500 were interest rate-sensitive momentum stocks, which were headed by Apple Inc. and Microsoft Corp.

Following news that the health insurers are in talks to merge, shares of Humana Inc. and Cigna Group fell 5.5% and 8.1%, respectively, according to a source with knowledge of the situation.

Following the announcement of a $10 billion share repurchase and a 33% dividend increase, General Motors saw a 9.4% increase in value. Shares of Ford Motor Company rose 2.1%.

CrowdStrike Holdings jumped 10.4% after releasing its sales estimate for the fourth quarter which exceeded expectations.

After the cloud-based data management platform raised its projected yearly profit, NetApp saw a 14.6% boost in value.

On the NYSE, advancers outnumbered decliners by a ratio of 2.06 to 1; on the Nasdaq, the ratio favored advancers by a ratio of 1.51 to 1.

The Nasdaq Composite had 97 new lows and 82 new highs, while the S&P 500 recorded 30 new 52-week highs and one new low.

The volume of shares traded on US exchanges was 11.42 billion, which was lower than the average of 10.45 billion for the entire session for the previous 20 trading days.

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Source - Reuters





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S&P 500 closes lower on conflicting Fed signals