Downward interest rate trend pushes buying mood
Dow Jones hits annual high
December 1, 2023, 10:42 p.m
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Weak US economic data is creating such a good mood on Wall Street that the Dow is reaching a new annual high. Some investors are now betting on the Fed’s first interest rate cut in January. At least the top central banker is not stifling hopes.
Weak economic data at the end of the week fueled hopes on Wall Street that interest rates would soon fall in the USA and caused share prices to rise. In keeping with this, the recent rally in bond prices showed no signs of letting up, with market interest rates falling sharply again. The ten-year return is now 4.21 percent, compared to an annual high of just under 5 percent in mid-October. US manufacturing activity contracted for the 13th month in a row in November, which was seen by the market as a sign of the effectiveness of interest rate hikes.
There were also signals from US Federal Reserve Chairman Jerome Powell that the interest rate hikes were likely over. He remained cautious in remarks at a presentation, saying “it would be premature to conclude with confidence that we have achieved a sufficiently restrictive positioning or to speculate about when monetary policy might be eased.” But he also said the recent decline in inflation and the gradual slowdown in wage growth were evidence that the Fed’s rate hikes were successful. On the interest rate futures market, the probability of the first interest rate cut in March rose from 41.5 to 55 percent. A rate cut even in January is priced in with a 10 percent probability, compared to 4 percent the day before.
The Dow Jones Index increased by a further 0.8 percent to the annual high of 36,245 points. The record high of 36,952 points from January 2022 is gradually coming into view. The S&P 500 made up 0.6 percent, the Nasdaq indices rose similarly. According to initial information, there were 2,456 (Thursday: 1,685) price winners and 436 (1,161) losers on the Nyse. 40 (71) shares closed unchanged.
Dollar recovery halted
The one on the recovery course dollar turned around with the falling market interest rates and fell again. Ultimately, he left the day little changed regarding the euro. The gold benefited from falling interest rates because it made it relatively more attractive as an investment. The price rose by $35 to 2072 per troy ounce. Apart from a brief blip in May, this is the highest level of the year.
It went down by a good 2 percent Oil price. The additional production cuts decided at the OPEC+ meeting had already evaporated the day before and were even acknowledged with falling prices. According to market experts, the market reaction indicates concerns because the announced cuts are voluntary. This is a sign that it is becoming increasingly difficult to agree on group-wide measures and raises doubts that the agreed funding cuts will be implemented by the individual cartel members.
“We suspect that OPEC+’s next step will be to increase production and that any announced voluntary cuts will be gradually reversed by the end of 2024,” said Bill Weatherburn, commodities expert at Capital Economics.
Pfizer under pressure
It fell significantly by over 5 percent Pfizer stock. The pharmaceutical giant suffered a setback in the study of a weight loss preparation and ended the study. Tesla fell by 0.5 percent and were unimpressed by the fact that Tesla has now started deliveries four years after presenting the first pick-up model, the Cybertruck. According to market experts, the Cybertruck is more interesting from a marketing perspective than as a profit generator.
Uber Technologies rose by 1.7 percent. There was speculation here about the stock being included in the S&P 500 index after the passenger transport service provider qualified for inclusion in the index with recent positive quarterly figures. It could be announced after the market closes as part of the index’s quarterly review, it said.
Marvell Technology lost 5.3 percent after the maker of memory, telecommunications and semiconductor products reported a larger-than-expected loss for the third quarter. With Dell (-5.2%), another technology stock was very weak. The computer manufacturer had disappointed in terms of sales.