The US stock market rebounded on Monday, driven by a surge in the technology sector, as investors evaluated the future trajectory of interest rates following the Federal Reserve’s indication of maintaining higher rates for an extended period. The S&P 500 (^GSPC) advanced 0.7%, while the tech-heavy Nasdaq (^IXIC) saw a nearly 1% increase. The Dow Jones Industrial Average (^DJI), after initially declining, managed to close with a modest gain of almost 0.2%.
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Tech Sector Fuels Market Rebound
Semiconductor stocks were among the strongest performers, with Nvidia (NVDA) and Broadcom (AVGO) shares rising more than 3% and 5%, respectively. Robust gains from social media giant Meta (META) and electric vehicle leader Tesla (TSLA) also contributed significantly to the broader market’s upward momentum.
Navigating a Volatile Week and Looking Ahead
This rally follows a turbulent week marked by volatility. While Friday saw all three major averages close over 1% higher, the overall weekly performance was down approximately 2%. The Federal Reserve’s signaling of a slower pace of rate cuts in the coming year triggered one of the worst trading days of the year on Wednesday. Friday’s release of the Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, offered some reassurance with signs of cooling inflation, albeit with persistent stickiness. However, a dissenting voice within the Fed expressed concerns about the need for further action to combat inflation. Current market expectations, as reflected by the CME FedWatch tool, suggest a high probability of the Fed holding rates steady next month, with a more divided outlook for the March meeting.
Economic Data and Holiday Trading Schedule
Recent economic data revealed a significant drop in US consumer confidence in December, marking the largest month-over-month decline since November 2020. This decline stems from growing uncertainty among Americans regarding the economic outlook for the year ahead. This week’s lighter economic calendar offers a respite for Wall Street, allowing for reflection and digestion of recent events before heading into 2025. Markets will operate on a shortened schedule, closing at 1 p.m. ET on Tuesday in observance of the Christmas holiday.
Conclusion: Market Poised for Year-End Reflection
The stock market’s positive performance on Monday, fueled by tech sector strength, provides a counterpoint to the recent volatility. As the year draws to a close, investors are grappling with the implications of the Fed’s policy pronouncements and economic data releases. The shortened holiday week offers a period for consolidation and assessment before the market navigates the challenges and opportunities of the new year.
