2023-11-18 12:43:24
Wall Street Stock Exchange
US stock indices recorded notable increases during trading in the week ending November 17, continuing their series of gains for the third week in a row, supported by the slowdown in US inflation along with the decline in US Treasury bond yields and the avoidance of a government shutdown scenario.
With the close of yesterday’s session on Friday, the Nasdaq 100 index rose marginally by 0.03% to 15,837.99 points, and the S&P 500 index ended at 4,514.03 points, with an increase estimated at about 0.13%, while the Dow Jones Industrial Average settled near the closing level of the last session at 34,947.29 points.
The most important factors that affected the performance of the US stock market this week
The strong recovery in risk appetite in stock markets supported US stock market profits during the ending week, as the VIX 500 volatility index settled at its lowest levels in 8 weeks, recording about 13.80 points, as the index fell by 2.61% during the week, which reflects the decline in investors’ fears. A recovery in risk appetite in the US stock market.
The rise in risk appetite in stock markets is due to several factors, the most important of which is US inflation data. Likewise, US stocks received strong support from the decline in US Treasury bond yields and the country avoiding a government shutdown scenario. Below, it can be clarified how these factors supported the strong rise of the US stock market:
First: the slowdown in inflation in the United States of America
Official data revealed that US inflation slowed significantly during last October, as the annual consumer price index recorded about 3.2%, while market expectations indicated a slowdown to only 3.3%, after inflation stabilized near 3.7% last September, which coincided with… The annual US core inflation rate (which excludes energy and food prices) slowed to 4.0%, while market expectations indicated a decline in inflation to only 4.1% during the same period, and the previous reading of the index recorded about 4.1% at the end of last September.
Accordingly, the risk appetite of investors in the US stock market has rebounded strongly, with markets optimistic about the US Federal Reserve ending its monetary tightening cycle and not raising interest rates again at its next meetings, as a result of slow inflation in the country, which was reflected positively on the performance of US stocks this week.
Second: The decline in US Treasury bond yields
The recovery in the performance of US stocks came against the backdrop of a decline in US Treasury bond yields of various terms, as a result of negative US inflation developments, which reinforced investors’ reluctance to buy bond yields in favor of stocks. For example, losses in the US 10-year Treasury bond yield this week amounted to about 4.58%. As investors believe that bond yields have already reached their peak, especially since the markets have come to believe that the Federal Reserve has finished the battle to curb high inflation and may not raise interest rates again.
Third: The United States avoided a government shutdown scenario
During the past week, the US Congress reached an agreement on drafting a temporary draft law to avoid a government shutdown, and it was then referred to the upper chamber – the Senate – for ratification. Finally, US President Joe Biden signed the temporary draft law yesterday, Friday, which led to the decline of fears. Regarding the economic and financial conditions of the largest economic power in the world, and its potential negative repercussions on American economic growth, this, in turn, strengthened the performance of American stocks in the past week.
How was the weekly performance of US stocks affected by these positive developments?
As a result of the aforementioned positive factors, the weekly gains of the S&P 500 index reached 2.24%, meaning the index’s profits increased by 98.80 points, and the Dow Jones Industrial Average achieved gains estimated at 664.14 points, meaning 1.94%. Also, the weekly gains of the Nasdaq 100 index amounted to about 1.99%, meaning It rose by 308.87 points this week.
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