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US equities presented a mixed picture on Friday, with the Nasdaq 100 experiencing a slight uptick, the S&P 500 remaining relatively flat, and the Dow Jones Industrial Average extending its losing streak to seven consecutive days. This week’s performance saw the S&P 500 and Dow Jones inch lower, while the Nasdaq 100 surged by almost 1%.
Tech Stocks Lead Market Gains Amidst Rising Interest Rates
Friday’s market gains were primarily spearheaded by the technology sector, fueled in part by Broadcom’s impressive quarterly earnings report. The company’s stock value soared by 24%, reaching a trillion-dollar valuation for the first time in its history, following strong earnings and an optimistic outlook for its artificial intelligence (AI) segment.
However, the broader market faced downward pressure throughout the week due to a consistent climb in interest rates. The yield on the 10-year US Treasury bond jumped approximately 25 basis points as investors braced themselves for the Federal Reserve’s Federal Open Market Committee (FOMC) meeting scheduled for the upcoming week.
Anticipation Builds for Potential “Hawkish Cut” by the Fed
While market consensus anticipates a 25-basis point reduction in interest rates by the Fed, some analysts suggest the possibility of a “hawkish cut,” potentially leading to a pause in rate cuts early next year. Market veteran Ed Yardeni posited that the FOMC’s statement and Summary of Economic Projections might signal such a pause.
Bank of America, in a Friday note, asserted that the market has already fully priced in next week’s expected rate cut. Given the Fed’s reliance on incoming economic data, the bank highlights the “risks for hawkish guidance” due to persistent signs of inflation. The CME FedWatch Tool currently projects only two 25-basis point rate cuts next year, down from three anticipated just a week ago.
This week’s inflation data revealed that while the November Consumer Price Index (CPI) aligned with expectations, the Producer Price Index (PPI) exceeded forecasts.
Upcoming Economic Data to Influence Market Direction
Looking ahead, investors will closely scrutinize key economic indicators, including US retail sales, housing starts, building permits, and a revised third-quarter GDP report. These data points will likely influence market sentiment and provide further insights into the economy’s trajectory.
Closing bell figures for US indexes on Friday:
- S&P 500: 6,051.09, down 0.01%
- Dow Jones Industrial Average: 43,828.06, down 0.20% (-86.06 points)
- Nasdaq Composite: 19,926.72, up 0.12%
Commodities, Bonds, and Crypto Update
In other markets:
- West Texas Intermediate crude oil rose to $71.18 per barrel.
- Brent crude oil, the international benchmark, climbed to $74.42 per barrel.
- Gold experienced a decline to $2,666.90 per ounce.
- The yield on the 10-year Treasury bond increased to 4.400%.
- Bitcoin appreciated to $101,588.
The coming week promises to be pivotal for the financial markets as investors await the Fed’s decision and absorb the latest economic data releases. The potential for a “hawkish cut” and persistent inflationary pressures introduce significant uncertainty into the market outlook.
