U.S. stocks continued to rise on Monday (December 18), driven by heavy trading as traders largely ignored more warnings from Federal Reserve officials.
The S&P 500 rose 0.5% following a seven-week bull run, driven in part by more than $40 billion in mergers and acquisitions, which provided a positive boost to the market. The Nasdaq 100 rose 0.6%, setting a record close for the second consecutive session. Wall Street's fear gauge, the VIX, continues to hover around 12, just shy of recent multi-year lows.
"This week we will see if the seasonal trend of stocks rising in the second half of December encounters resistance due to the strong recent short-term gains," said Chris Larkin, managing director of trading and E*Trade at Morgan Stanley.
Whether the S&P 500 can extend its eighth week of gains will likely depend on recent U.S. economic data, including durable goods orders, personal consumption expenditures (the Fed's preferred inflation measure) and final estimates of third-quarter gross domestic product.
Chris Larkin wrote in an emailed comment: "Since 1964, the S&P 500 has closed higher for seven consecutive weeks only 20 times, and 12 of those times extended the rally to eight weeks."
The U.S. Treasury market took a breather on Monday, although stocks remained relatively immune to expectations that Federal Reserve officials would seek to rein in earlier and larger-than-expected interest rate cuts. U.S. Treasury yields rose, with the 2-year U.S. bond yield around 4.5% and the 10-year U.S. bond rate near 4%. The dollar stabilized while the yen weakened.
Chicago Fed President Austan Goolsby and Cleveland Fed President Loretta Mester are the latest to join a growing number of central bankers seeking to temper optimism about rate cuts, following New York Fed President John William last week James said it was too early to bet on a rate cut in March.
BMO Capital Markets strategist Ian Lyngen said policymakers failed to convince the market. He believes that today's trend in U.S. Treasury bonds is more likely to be driven by consolidation after a sharp rise. "The Fed has been emphasizing that monetary policy is now in data-dependent mode; investors would certainly agree with that stance, except that the market is betting that data will fall faster than the committee."
Across the pond, ECB Governing Council member Bostjan Vasle took a cautious approach after ECB President Christine Lagarde said last week that the central bank had not discussed cutting interest rates at all.
Traders will also be watching the Bank of Japan's two-day policy meeting starting on Monday. While speculation is growing that the Bank of Japan will soon end the world's last negative interest rate regime, economists see April as the most likely time to make a change. According to data from a Bloomberg survey of more than 50 economists, about 15% expect Ueda to end negative interest rates in January.
Société Générale economists led by Wei Yao wrote in a report: "There is no need for the Bank of Japan to rush to make policy changes. But the market will watch for any signs that the board is willing to end negative interest rates or yield curve control."
In commodities, gold prices rose while oil extended last week's gains as major shipping lines suspended shipments through the Red Sea as attacks on merchant ships escalated.
Focus and weather vane of Tuesday’s trading day:
①08:30 The Reserve Bank of Australia releases the minutes of its December monetary policy meeting
②11:00 The Bank of Japan announces its interest rate decision
③14:30 Bank of Japan Governor Kazuo Ueda holds a press conference
④15:00 Switzerland’s November trade balance
⑤18:00 Euro zone November CPI annual rate final value, 18:00 Euro zone November CPI monthly rate
⑥19:00 UK December CBI Industrial Order Difference
⑦21:30 Canadian November CPI monthly rate, US November annualized total number of new housing starts, US November total building permits
⑧Federal Reserve Bostic gave a speech at 01:30 the next day
⑨ 05:30 the next day, API crude oil inventories in the United States for the week to December 15
Major currency trend analysis:
Euro: EUR/USD rose, closing at 1.0923, an increase of 0.27%. Technically, the initial resistance for the exchange rate to rise is at 1.0939, further resistance is at 1.0955, and the key resistance is at 1.0976; the initial support for the exchange rate to fall is at 1.0900, further support is at 1.0876, and the more critical support is at 1.0860.
GBP: GBP/USD fell, closing at 1.2647, a decrease of 0.25%. Technically, the initial resistance for the upward movement of the exchange rate is at 1.2691, the further resistance is at 1.2735, and the key resistance is at 1.2767; the initial support for the downward movement of the exchange rate is at 1.2615, the further support is at 1.2583, and the more critical support is at 1.2539.
Japanese Yen: USD/JPY rose, closing at 142.758, an increase of 0.44%. Technically, the initial resistance for the upward movement of the exchange rate is at 143.299, the further resistance is at 143.803, and the key resistance is at 144.449; the initial support for the downward movement of the exchange rate is at 142.149, the further support is at 141.503, and the more critical support is at 140.999.
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2023-12-19
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