S&P 500 Nears Record Peak in Muted Start to Week: Market Overview

As 2023 draws to a close, Wall Street commenced the final week of the year on a subdued note, following a dynamic rally that brought the US stock market tantalizingly close to its historical peak.

The stock market witnessed modest gains amid subdued trading activity. The S&P 500, after experiencing its longest consecutive weekly growth since 2017, now sits less than 1% below its highest-ever mark. This surge, spurred by the Federal Reserve’s recent dovish stance, has fueled market optimism but also raised concerns about potential market corrections. The period typically known as the Santa Claus rally, covering the last five sessions of the year and the first two of the new year, has historically been a strong phase for the market, with the S&P 500 averaging a gain of 1.3% during this time, as noted by the Stock Trader’s Almanac. The S&P 500’s recent climb to approximately 4,770, and a peak in the semiconductor sector, exemplify this trend. The Russell 2000 index also saw a 1% increase. The rally’s strength is notable, with only a few instances since 1957 where such consecutive winning streaks have extended beyond eight weeks.

In the bond market, the 10-year Treasury yield hovered around 3.9%, marking a fourth consecutive week of gains, reflecting growing investor belief in the Federal Reserve’s potential rate cuts in the coming quarter.

In corporate developments, FedEx Corp. (FDX)  announced an accelerated share buyback agreement with Mizuho Markets Americas. The US government maintained a sales ban on Apple Inc.’s (APPL) smartwatches, leading the company to seek legal redress. Intel declared its plan to invest $25 billion in Israel. Additionally, Bristol Myers Squibb Co. (BYM) confirmed its acquisition of RayzeBio Inc. (RYZB), for an estimated $4.1 billion. Meanwhile, oil prices increased amid ongoing tensions and shipping disruptions in the Red Sea due to Houthi attacks, further exacerbated by US military actions in Iraq. Shipping stocks, including Maersk, experienced a downturn in response to these developments.

The economic agenda for the week is light, with home prices continuing their upward trend for the ninth consecutive month. According to early data from Mastercard SpendingPulse, US holiday retail sales grew slower than the previous year, as consumers showed a preference for value and promotional deals.

Key Market Movements:

• The S&P 500 increased by 0.3% as of midday in New York.
• Nasdaq 100 and Dow Jones Industrial Average both saw a 0.3% rise.
• The MSCI World index also went up by 0.3%.
• The Bloomberg Dollar Spot Index dipped by 0.2%.
• The euro and British pound appreciated against the dollar, while the Japanese yen remained steady.
• Bitcoin and Ether saw declines in their values.
• 10-year Treasury yields remained stable at 3.90%.
• Oil prices saw a significant rise, and gold also experienced a modest increase.