On Monday, U.S. stocks showed modest growth, reaching annual highs ahead of this week's major market catalysts, including inflation data and the Federal Reserve's policy announcement. These events are expected to significantly impact investor expectations regarding interest rate dynamics. Growth was driven by the strengthening of the industrial, raw materials, and consumer services sectors.
Market observers increasingly believe that the central bank has ended its interest rate hike cycle and may lower them in the first half of next year. These expectations contributed to the recent weeks' stock growth, with all three major indexes reaching their highest closing levels of the year.
Last week, markets assessed over a 50% probability of a Fed rate cut in March. However, recent data showed an acceleration in employment growth and a decrease in unemployment, while another report indicated a reduction in consumer inflation expectations.
These factors have raised hopes that inflation could continue to slow without plunging the economy into a recession, softening expectations for a March rate cut.
On Tuesday, investors will focus on the Consumer Price Index (CPI) data, which is expected to show that core inflation in November remained unchanged, followed by the Producer Price Index (PPI) and the Federal Reserve's final interest rate decision of the year on Wednesday.
Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida, said, "I don't think there's any reason to react ahead of any of these three events; we are just in a wait-and-see mode. The trend is likely to continue."
Polcari also noted that if the CPI is weaker than expected, it would be a bullish factor as it would indicate a slowdown in inflation.
The Dow Jones Industrial Average rose by 157.06 points, or 0.43%, to 36,404.93, the S&P 500 by 18.07 points, or 0.39%, to 4,622.44, and the Nasdaq Composite by 28.51 points, or 0.20%, to 14,432.49.
Among the Dow Jones index's leaders, Intel Corporation (NASDAQ:INTC) shares increased by 1.84 points (4.31%), closing at 44.54. Honeywell International Inc (NASDAQ:HON) shares grew by 5.78 points (2.97%), ending at 200.39. Nike Inc (NYSE:NKE) shares rose by 2.71 points (2.34%), closing at 118.62.
In the S&P 500 index, leading gainers included Cigna Corp (NYSE:CI) shares, up 16.68% to 301.96, Broadcom Inc (NASDAQ:AVGO) shares, gaining 9.00%, closing at 1.00, and Etsy Inc (NASDAQ:ETSY) shares, rising 5.76%, ending the session at 84.69.
Among the NASDAQ Composite index components, JetAI Inc (NASDAQ:JTAI) shares were leading gainers, up 81.93% to 3.02, Nextplay Technologies Inc (NASDAQ:NXTP) shares gained 71.44%, closing at 0.72, and Pasithea Therapeutics Corp (NASDAQ:KTTA) shares increased by 47.42%, ending at 0.44.
Market analysts almost unanimously believe that the Federal Reserve will maintain the current interest rate level at its announcement on Wednesday, but there are questions about the timing of the first rate cut. According to CME's FedWatch Tool, expectations for a rate cut in March of at least 25 basis points are around 43%, with a nearly 75% probability for May.
Later this week, the European Central Bank (ECB) and the Bank of England (BOE) are also expected to make policy statements.
The PHLX Semiconductor Index rose 3.4%, reaching its highest level since January 5, 2022, led by an 8.99% increase in Broadcom (AVGO.O) shares after Citigroup resumed coverage of the chipmaker with a "buy" rating.
Cigna (CI.N) shares jumped 16.68% after the healthcare insurance company halted attempts to acquire competing company Humana (HUM.N), as sources reported, and announced a $10 billion share buyback plan. Humana shares fell 1.04%.
Nike (NKE.N) shares increased by 2.33% and helped support the Dow after brokerage firm Citigroup raised the company's stock rating to "buy" from "neutral."
Other moving stocks included Macy's (M.N), which rose 19.44% after a group of investors, including Arkhouse Management and Brigade Capital, made a $5.8 billion offer to take the department store chain private, as reported by a source.
On the New York Stock Exchange, the number of advancing stocks exceeded decliners by a ratio of 1.2 to 1, and on the Nasdaq, decliners outnumbered advancers by the same ratio.
The S&P 500 posted 54 new 52-week highs and no new lows, while Nasdaq recorded 197 new highs and 143 new lows.
Trading volume on U.S. exchanges amounted to 11.32 billion shares, compared with the 20-trading day average of 10.89 billion.
The CBOE Volatility Index, based on S&P 500 options trading, rose 2.27% to 12.63.
Gold futures for February delivery lost 0.86%, or 17.35, reaching $1,000 per troy ounce. Regarding other commodities, January WTI crude futures rose 0.28%, or 0.20, to $71.43 per barrel. February Brent crude futures gained 0.34%, or 0.26, to $76.10 per barrel.
Meanwhile, in the Forex market, the EUR/USD pair remained virtually unchanged, down 0.03% to 1.08, while the USD/JPY pair increased by 0.83%, reaching 146.13.
Futures on the U.S. dollar index rose 0.05% to 103.69.
