Resilient Rise: Wall Street Wraps Up Third Winning Week with Modesty
Wall Street quietly concluded another week of growth, marking its third consecutive week of positive performance. Stocks maintained a steady upward trajectory, further adding to their already significant gains achieved during November.
The S&P 500 went up by 5.78 points, equivalent to a 0.1% increase, reaching a level near its highest point within the past three months. The Dow Jones Industrial Average had a small increase of 1.81 points, less than 0.1%, reaching 34,947.28, while the Nasdaq composite had a gain of 11.81 points, or 0.1%, reaching 14,125.48.
Several retail businesses saw substantial growth after surpassing analysts’ predictions in their quarterly earnings. Gap’s stock price skyrocketed by 30.6% when it disclosed a profit that exceeded Wall Street’s expectations, resulting in a year-to-date increase that is more than twice its previous gains. In a similar fashion, Ross Stores witnessed a 7.2% surge in its stock price after revealing stronger-than-anticipated profit and revenue figures.
Despite exceeding expectations, BJ’s Wholesale Club faced a decline of 4.8%, which analysts believe was due to the exclusion of new store openings in the underlying sales figure. Regrettably, the company did not meet expectations.
Retailers are wrapping up a summer season of revealing their earnings, which have surpassed expectations. According to FactSet, the companies in the S&P 500 are expected to announce their first overall growth in a year.
Nevertheless, the primary factor behind the substantial increase in stock prices this week is the perception that inflation has declined sufficiently for the Federal Reserve to halt its ongoing interest rate hikes, which have been adversely impacting the market.
In order to control inflation while avoiding a major economic decline, the Federal Reserve has recently raised its main interest rate to its highest level since 2001. This action is intended to stabilize the economy and lessen the effects on financial markets.
On Tuesday, a new report showed that consumer inflation was not as high as originally expected in the previous month. This information led to hope that the Federal Reserve would be able to maintain a stable situation effectively. Additional readings supported this positive outlook by suggesting that both inflation and the overall economy might be experiencing a decrease in growth.
At present, traders are trying to predict when the Federal Reserve will begin lowering interest rates. This move could potentially increase investment prices and offer support to the financial system. Although the Federal Reserve plans to keep interest rates high for a prolonged period to ensure they effectively combat inflation, traders are considering the chance of rate cuts starting in the summer of 2024.
Over the past weeks, there has been a decline in worries over inflation as the price of oil has experienced a substantial decrease. This drop can be attributed to concerns about an imbalance between an excessive supply of crude oil and a lack of demand for it.
The price of American crude oil for December delivery rose by $2.99 on Friday, resulting in a settlement price of $75.89. This increase helped to partially regain some of the significant losses experienced earlier in the week. However, it is worth mentioning that the current price is still significantly lower compared to its previous peak of $93 in late September.
The price of Brent crude, the global benchmark, rose by $3.19 on Friday, reaching $80.61 per barrel.
On Thursday, there was a small drop in the yield of the 10-year Treasury in the bond market, going from 4.44% to 4.43%. Just a few weeks prior to this, it had been even higher, reaching 5%, which was the highest it had been since 2007. This increase had a negative impact on stock and other investment prices.
If Treasury bond yields go down a lot and stocks go up a lot, it could have a bad effect on Wall Street. After the Federal Reserve’s recent meeting about interest rates, Jerome Powell, the Chair, said they might not keep raising rates if Treasury yields keep going up and stocks keep going down like they did over the summer. This is because these pressures could serve as substitutes for more rate increases.
Since that time, there has been a significant decline in profits, and it appears that November will be the most successful month for the S&P 500 in the past year. Economists from Deutsche Bank suggest that this indicates a relaxation of financial conditions by approximately fifty percent compared to the restrictions seen in October.
Nevertheless, Justin Weidner, along with other economists, opines that the Federal Reserve can alleviate its concerns about this relaxation as a result of recent encouraging updates regarding inflation and the economy.
The Hang Seng index in Hong Kong saw a noteworthy decrease of 2.1% in global stock markets. Similarly, Alibaba, a major Chinese e-commerce company, faced a significant decline in its stock prices when it decided to cancel its cloud computing unit’s spin-off plan. The company attributed this cancellation to the uncertainties caused by the United States’ chip restrictions.
In different regions of Asia, the stock indexes had different performances, while in Europe, they saw a more notable rise.