After the Christmas holiday, the US stock and bond markets continued their recent hot trend overnight, opening the closing week of 2023 with a strong outlook.
Market data shows that the S&P 500 index rose 0.4% on Tuesday, only 0.5% from its record closing high. The Nasdaq Composite Index, which is concentrated in technology stocks, rose 0.5%, while the blue chip Dow Jones Index rose about 159 points, up 0.4%. All 11 major sectors of the S&P 500 index rose in unison, led by interest rate sensitive large cap stocks and chip stocks. At present, the three major stock indexes in the United States are expected to record an increase in monthly, quarterly, and annual trends.
Many industry insiders point out that the further rise of the US stock market on Tuesday indicates that the market is expected to once again experience a "Santa Claus trend" this year - that is, the stock market tends to rise in the last five trading days of the year and the first two trading days of the following year. According to the Stock Trader's Yearbook, the S&P 500 index has risen an average of 1.3% over the past 7 days since 1969.
Peter Cardillo, Chief Market Economist at Spartan Capital Securities, said, "The upward momentum of the stock market still exists, but it is unlikely to see a significant increase in year-end trading with relatively quiet trading. Last Friday's inflation data was good. If inflation continues to decline in January and February, the Federal Reserve is likely to lower interest rates earlier than expected."
From a weekly perspective, as of last Friday, the three major stock indexes in the United States have risen for eight consecutive weeks, marking the longest consecutive weekly rise in many years. Economic data shows that inflation is slowing and approaching the Federal Reserve's target of 2%, and market expectations for the Fed's interest rate cut next year are becoming stronger.
In the view of Adam Turnquist at LPL Financial, continuous buying of stocks of this size is not only rare, but also a bullish signal of improved investor sentiment and market momentum. He pointed out, "Although all winning streak will eventually come to an end, history suggests that this rebound may not end easily."
If the S&P 500 index rises for the ninth consecutive week, it will be the longest winning streak since 2004. According to Chris Larkin, Managing Director of Morgan Stanley's E * Trade trading department, the index has experienced 17 or more consecutive gains for 8 weeks since 1957, with 9 of them reaching week 9, but only 3 of them reaching week 10.
Craig Johnson, Chief Market Technologist at Piper Sandler, said that as investors continue to follow eight weeks of consecutive gains, the US stock market is approaching a historic high, and any pullback will be mild and brief.
Navellier& Louis Navellier, Chief Investment Officer of Associates, also believes, "It seems that we may still end this year's investment at a high point. There is no reason not to continue chasing this market before the end of the year."
In terms of US bonds, long-term US bonds have also maintained their recent surge overnight. As of the end of trading in New York, the 10-year US Treasury yield fell 0.9 basis points to 3.899%; The 30-year US Treasury yield fell 0.6 basis points to 4.054%. The bond market tends to be relatively quiet in the last week of each year, with many traders taking a vacation at the end of the year.
The two-year US Treasury yield, which usually follows interest rate expectations, rose 1.2 basis points at the end of the day to 4.349%, giving up most of the earlier gains. On Tuesday, the US Treasury Department auctioned US $57 billion of two-year treasury bond bonds, with strong overall demand. The winning interest rate was 4.314% and the bidding multiple was 2.68 times.
The latest housing price data released on Tuesday further demonstrates the market's optimism. According to the S&P CoreLogic Case Shiller's US housing price index, housing prices rose 4.8% year-on-year in October, the largest year-on-year increase since 2023.
The market currently expects the Federal Reserve to cut interest rates as early as March next year, and by the end of 2024, the rate cut will be as high as about 152 basis points. "Inflation is expected to continue to cool, which will give Fed policymakers the ability to cut interest rates before June to prevent a passive tightening of real interest rates," said an analyst at Action Economics in a report on Tuesday
Tom di Galoma, Managing Director and Co Head of Global Interest Rate Trading at brokerage firm BTIG, said, "The US Treasury yield curve is flattening, and it looks like the Federal Reserve will cut interest rates in 2024. I estimate it will be in the middle of 2024."