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  • Writer's pictureThe San Juan Daily Star

Wall Street advances as rate-cut fever lingers

Wall Street extended its gains on Tuesday as last week’s dovish policy pivot from the Federal Reserve continued to reverberate and investors looked ahead to crucial inflation data.

A broad rally boosted all three major U.S. stock indexes were well into positive territory, and boosted the S&P 500 to within one percentage point of its all-time closing high reached in Jan. 22. If the benchmark index closes above that level, that would confirm it has been in a bull market since October 2022.

The blue-chip Dow (.DJI) has set a course for another all-time closing high.

Smallcaps have had a strong run; the Russell 2000 (.RUT) index was leading gainers, up 1.7%. The index has surged over 11% in December so far.

“It’s encouraging that the market is broadening out,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “It will be interesting to see whether that trend continues into early next year.”

At the conclusion of the central bank’s policy meeting last Wednesday, the Federal Open Market Committee signaled that it had reached the end of its tightening cycle and opened the door to rate cuts in the coming year.

Atlanta Fed President Raphael Bostic said on Tuesday there was “no urgency” to begin cutting rates, given the strength of the economy and the slow rate at which inflation is cooling down toward the central bank’s 2% annual target.

Even so, at last glance, financial markets are pricing in a 67.5% likelihood that the Fed will implement a 25 basis point rate cut as soon as March, according to CME’s FedWatch tool.

“The market is probably being a little too aggressive with rate cut expectations,” Pavlik added. “You have to be careful what you wish for; two rate cuts next year probably make sense.

“But four and five rate cuts means there’s something wrong with the economy.”

On the economic front, a report from the Commerce Department showed groundbreaking on new single-family homes surged 18% to more than a 1-1/2 year high in November.

The S&P 1500 Homebuilding index (.SPCOMHOME) and the Philadelphia SE Housing index (.HGX) advanced 1.9% and 1.4%, respectively.

Later in the week, the Commerce Department is expected to release its third and final take on third-quarter GDP on Thursday, to be followed by its broad-ranging Personal Consumption Expenditures (PCE) report on Friday, which will cover income growth, consumer spending, and crucially, inflation.

At 2:12PM ET, the Dow Jones Industrial Average (.DJI) rose 210.72 points, or 0.56%, to 37,516.74, the S&P 500 (.SPX) gained 21.93 points, or 0.46%, to 4,762.49 and the Nasdaq Composite (.IXIC) added 72.35 points, or 0.49%, to 14,977.54.

All 11 major sectors of the S&P 500 were in positive territory, with communication services (.SPLRCL) enjoying the largest percentage gain.

Boeing (BA.N) rose 0.9% after German airline Lufthansa (LHAG.DE) revealed it ordered 40 737-8 MAX jets from the planemaker.

Kenvue climbed 2.2% following a U.S. court ruling in favor of the consumer health company in a lawsuit over the company’s drug Tylenol.

Amgen (AMGN.O) advanced 1.1% after BMO upgraded the company’s shares to “outperform” from “market perform”.

Advancing issues outnumbered declining ones on the NYSE by a 4.87-to-1 ratio; on Nasdaq, a 2.74-to-1 ratio favored advancers.

The S&P 500 posted 46 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 178 new highs and 73 new lows.

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