Dow hovers near record as final full week of 2023 trading shapes up


U.S. stocks traded mostly higher in the early afternoon on Monday, with the S&P 500 edging toward its all-time high and the Dow Jones Industrial Average mostly unchanged after finishing last week at an all-time high.

What’s happening

  • The Dow
    was steady at around 37,307.

  • The S&P 500
    was up 24.4 points, or 0.5%, at 4,743.

  • The Nasdaq Composite
    gained 97 points, or 0.7%, to trade at 14,912.

The Dow last week surged 2.9%, closing Friday at a record, while the S&P 500 saw a 2.5% rise on the week and the Nasdaq Composite surged 2.9%.

What’s driving markets

The last full trading week of the year got under way with the S&P 500 sitting at its best level in nearly two years, and less than 2% off of its record high.

“This week we’ll see whether the stock market’s seasonal tendency to rally in the second half of December bumps up against potential exhaustion amid one of the strongest short-term rallies of the past several years,” Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley, said in emailed comments.

The equity benchmark has delivered a seven-week winning streak — its best-such run in six years — gaining more than 14% in that period amid hopes the Federal Reserve will start cutting interest rates next year.

The S&P 500 has closed higher seven weeks in a row only 20 other times since 1964, and it’s stretched the run to eight weeks 12 of those times, Larkin noted.

“There doesn’t appear to be anything pending this week that might stop the market momentum in these last two short trading weeks of the year,” according to Louis Navellier, chairman and founder at Navellier & Associates.

However, trading in stocks and bonds was less ebullient early Monday after Fed officials — including New York Federal Reserve Bank President John Williams and Chicago Fed President Austan Goolsbee — in recent days looked to rein in expectations that the central bank was likely to start cutting rates soon.

The 10-year Treasury yield
which in October popped above 5%, was trading around 3.962% at the start of the week, up 4.8 basis points from Friday.

“Despite some pushback from Fed officials, interest-rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week,” Stephen Innes, managing director at SPI Asset Management, said in a note.

Resolute bull Tom Lee, head of research at Fundstrat, said stocks will also be supported by the buying of fund managers who had been worried about the macroeconomic environment and, until recently, had been overly defensive.

“As we think about the final two weeks of 2023, this tells me that there will be a certain amount of performance-chasing into year-end,” said Lee. “And couple that with the fact that retail investors withdrew $240 billion from ETF and mutual funds, in a year when S&P 500 [was up greater than] 25%, and one can see why equities have an underlying bid into year-end.”

The National Association of Home Builders said its monthly confidence index rose 3 points in December to 37. The index rose for the first time in five months as mortgage rates fell.

Companies in focus

  • U.S.-listed shares of NIO Inc.

    rose 5% after the Chinese electric-vehicle maker said it’s received a $2.2 billion investment from an Abu Dhabi investor.

  • Japan’s Nippon Steel on Monday said it’s reached a deal to buy U.S. Steel Corp.

    after the 122-year-old Pittsburgh steelmaker put itself on the block. Shares of U.S. Steel jumped 27.2%.

— Jamie Chisholm contributed.

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