2023-12-14 21:51:11
New York (AFP) – The New York Stock Exchange continued to savor Thursday the new tone adopted by the Fed the day before which indicates that the American central bank is ready to lower interest rates next year.
Published on: 12/14/2023 – 10:51 p.m. Modified on: 12/14/2023 – 10:49 p.m.
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The Dow Jones index continued its record high from Wednesday, advancing 0.43%. The S&P 500 gained 0.26% and the Nasdaq, with its strong technological coloring, increased by 0.19%.
Bond rates have eased further, with ten-year rates falling below 4% for the first time since the end of July.
The Federal Reserve left its rates unchanged on Wednesday as expected but above all it indicated that it might lower rates three times next year, a prospect which delights the markets.
Jerome Powell, its chairman, acknowledged for the first time that the Monetary Committee had discussed the timing of rate cuts.
“The Fed has clearly indicated that it is ready to reduce its rates. This is a paradigm shift for the market,” commented Adam Sarhan of 50 Park Investments for AFP.
“The Fed has now ended the most aggressive rate hike cycle it has undertaken in decades,” he added. The cost of credit was increased by 5.5 points eleven times over a year and a half.
“It seems at least for the moment that the Fed has won its fight once morest inflation and the market is delighted with this victory,” assures the analyst.
The sectors hitherto handicapped by high interest rates have had a burst of energy as evidenced by the sharp rise (+2.62%) in the Russell 2000 index which includes small capitalizations from Wall Street or he surge of regional banks like Zion Corporation (+9.21%), Western Alliance (+9.29%) or Comerica Incorporated (+8.54%).
But other analysts were more circumspect in their interpretation of the market, questioning the wisdom of celebrating future rate cuts when it is synonymous with a cure for a slowdown in economic activity.
“I fear that the market has let itself be carried away. I am a little afraid that it will get ahead of Santa Claus (…) in this favorable season when we often talk regarding the + Santa Claus bull market +”, quipped Steve Sosnick of Interactive Brokers.
“On the bond side, the market continues to tell us that the Fed is cutting rates because it senses weakness in the economy, while on the stock side, the stock market thinks it is cutting rates to avoid this weakness. Which one is it?”, he worries.
The analyst recalls that the Fed forecasts growth of only 1.4% next year “but it does not say how we get there: might there be a recession with two bad quarters?”
The bond market saw yields on ten-year Treasury bills fall to 3.91%, around 9:30 p.m. GMT, the lowest in more than five months following they had climbed to 5% in October.
The dollar fell by 1% once morest the euro. Both the ECB and BoE have extended their pause on rate hikes but do not appear ready to cut them.
On the market, shares of vaccine manufacturer Moderna soared 9.25% to $85.87. The laboratory hopes that its therapeutic vaccine once morest skin cancer will be approved as early as 2025, following new positive results announced on Thursday.
The Adobe software group fell 6.35% to $584.64. Adobe posted good results for the fourth quarter, the group then expects lower sales than analysts expected.
Mid-sized companies linked to solar energy shone like Invesco Solar (+8.14%) or Sunrun (+19.92%).
Airlines soared like United Airlines (+4.83%) and American (+3.55%). The online car seller Carvana boosted (+12.31%) to reach its highest level in three months.
© 2023 AFP
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