The US stock market saw gains on Monday, December 23rd, driven by a strong rally in the technology sector. Investors continue to assess the future trajectory of interest rates following the Federal Reserve’s recent indication that rates may remain elevated for a longer duration. The S&P 500 index climbed 0.7%, while the tech-heavy Nasdaq Composite surged nearly 1%. The Dow Jones Industrial Average, after initially experiencing losses, edged up by almost 0.2%.
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Semiconductor and Tech Giants Lead the Charge
Semiconductor stocks were prominent gainers, with Nvidia and Broadcom shares rising more than 3% and 5%, respectively. Notable contributions to the broader market’s upward movement also came from robust gains in social media giant Meta and electric vehicle leader Tesla.
Market Recap and Federal Reserve Outlook
Following a volatile week that ended with a positive Friday session, Wall Street commenced the holiday-shortened week with renewed optimism. Last week’s trading saw all three major averages concluding Friday over 1% higher, but down approximately 2% for the week overall. The Federal Reserve’s signaling of a potential slowdown in rate cuts next year contributed to significant market fluctuations, including one of the year’s worst trading days on Wednesday.
While Friday’s release of the Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, indicated a further cooling of inflation, concerns about persistent price pressures remain. A dissenting voice within the Fed expressed opposition to the recent rate cut, emphasizing the need for continued efforts to combat inflation.
Current market expectations, as reflected by the CME FedWatch tool, suggest a high probability of the Fed maintaining steady rates in January. However, for the subsequent meeting in March, the odds are roughly even between a rate cut and maintaining the current rate.
Consumer Confidence Dips and Holiday Trading Schedule
Recent economic data revealed a significant drop in US consumer confidence for December, marking the largest month-over-month decline since November 2020. This decline reflects growing uncertainty among Americans regarding the economic outlook for the coming year.
This week’s lighter economic calendar offers a respite for Wall Street, allowing for reflection and analysis as 2025 approaches. Markets will observe an early closure at 1 p.m. ET on Tuesday, December 24th, in anticipation of the Christmas holiday on Wednesday. Trading will resume on Thursday. This brief pause provides an opportunity for investors to consolidate their positions and prepare for the year ahead. The market’s reaction to the recent Fed announcements and economic data will continue to be closely monitored in the coming sessions.
