Stocks eked out modest gains on Wednesday, with no important news or events to shift them from their upward course or to prop up stronger gains. Despite the light trading day and absence of catalysts, the Dow Jones Industrial Average (DJIA) and the Nasdaq-100 (NDX) reached their new all-time highs, while the S&P 500 (SPX) came within 0.5% from its record high set in January 2022. The Nasdaq Composite (NDAQ) has also inched higher.
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It has been a strong year for stocks, despite the strong declines in March, when the regional banks wobbled, and in September and October, when the economic uncertainty weighed on sentiment. The Nasdaq-100 has led the gains in 2023, rising 55.6% year-to-date, with the Nasdaq Composite right behind it with a 45.4% increase under its belt. The S&P 500 has rallied over 25%, a great showing compared to its median annual of 10% since 2000. The blue-chip DJIA has also logged an impressive gain this year, rallying 13.6%.
The traditional Santa rally is helping stocks to extend their gains sparked by improvements in inflation and other data, which allowed the Federal Reserve to decree the long-awaited pivot to monetary easing to happen in 2024.
At the moment, futures markets are pricing in a 74% chance for a 0.25% rate cut at the Fed’s policy meeting in March and assign a probability of above 60% that the rates will be a full percentage point lower by July 2024. Some analysts are warning that the stocks are pricing in too large rate cuts, not supported by the economic data, which could lead to investor disappointment, pulling stocks down. But for now, the Happy New Year rally is in full swing.
