By Joy Wiltermuth and Isabel Wang
The S&P 500 still on track for its best month since July 2022
U.S. stocks closed lower on Wednesday, but were still poised for their biggest month of gains this year, as Treasury yields retreated and investors hoped for a rate cut from the Federal Reserve next year.
How were stock indices traded?
The Dow Jones Industrial Average DJIA rose 13.44 points, or less than 0.1%, to finish at 35,430.42. The S&P 500 SPX lost 4.31 points, or 0.1%, to close at 4,550.58. The Nasdaq Composite COMP fell 23.27 points, or 0.2%, to finish at 14,285.49.
The Dow was on track for a 7.2% monthly gain, its best since October 2022. The S&P 500’s 8.5% advance and the Nasdaq Composite’s 11% rise would be their best monthly gains since July 2022, according to Dow Jones Market Data.
What motivated the markets
Stocks fell late Wednesday after the Fed’s “Beige Book” survey of its districts showed weaker economic activity and lower labor demand compared with a month ago.
“This is obviously a bleaker report than the GDP numbers we saw this morning,” Alex McGrath, chief investment officer of NorthEnd Private Wealth, said in emailed comments.
McGrath said the Fed’s survey raises the possibility that “we have already entered a mild recession that many have been predicting for a year.”
Stocks rebounded earlier in the session after U.S. data showed the economy grew at a seasonally adjusted annual rate of 5.2% in the third quarter. The figure is higher than expectations of 5% and the previous estimate of 4.9%.
Despite mixed economic data, key indicators for U.S. stocks were still on track for their best monthly gains of the year, helped by a sharp decline in benchmark borrowing rates for the economy.
The 10-year Treasury yield BX:TMUBMUSD10Y, which hit a 16-year high just above 5% in October, slipped to 4.27% on Wednesday as investors strengthened their bets that a slowdown in inflation would encourage the Fed to stop raising its key rates and even reduce them. prices in a few months.
“I don’t think they will make cuts in March,” said Sonu Varghese, global macro strategist at Carson Group. “But right now the market is optimistic about a shorter-term rate cut.”
The odds of a 25 basis point Fed rate cut were put at 46.2% on Wednesday, up from just 21% in the previous session. The probability of a rate cut of at least 25 basis points by May was close to 76%, according to the CME FedWatch tool.
The move follows comments Tuesday by Fed Governor Chris Waller, who suggested that current monetary policy is well-positioned to slow the economy and curb inflation.
Atlanta Fed President Raphael Bostic said Wednesday he was more confident in his forecasts of a soft landing for the economy and inflation continuing to fall to 2%. Chairman Jerome Powell is scheduled to deliver a speech Friday at 11 a.m. Eastern.
Among other economic data, households increased their spending at a pace of 3.6% in the third quarter, up from 4% initially, while the personal consumption expenditures (PCE) price index was revised to decline to 2.8% annualized increase from 2.9% in 2017. the previous publication, economists said.
“When people work, they can spend,” Jamie Cox, managing partner at Harris Financial Group, told MarketWatch.
Cox expects higher interest rates to weaken consumption and lead to rate cuts next year, but sees healthy signs of economic growth amid rates no longer being held at levels extremely low.
“If you’re still getting GDP growth and rates are well above 3%, then that’s good,” Cox said.
The U.S. goods trade deficit also widened to $89.8 billion in October, the Commerce Department said Wednesday. An advanced estimate of wholesalers’ stocks showed a drop of 0.2% in October.
Key inflation data, in the form of the PCE index for October, will be released Thursday at 8:30 a.m. ET.
Read: PCE inflation report could show cooling. Does this mean the Fed is done raising rates?
The DXY dollar index is down 3.6% for the month so far, helping to push up the price of gold (GC00), which is above the $2,000 mark. ounce.
Still, the chances of a U.S. soft landing remain a matter of debate. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said Wednesday that he is less certain than others that a U.S. recession can be avoided.
See: Bill Ackman warns economy will collapse if Fed doesn’t hurry up and cut rates.
Companies in the spotlight
General Motors Co.’s GM stock gained 9.4% Wednesday after the automaker revealed plans to reward shareholders handsomely now that the strikes are over. Shares of Petco Health & Wellness Co. Inc. WOOF fell 28.9% Wednesday after the pet care retailer reported a surprise third-quarter fiscal loss and cut its outlook for the whole of the year. Shares of Foot Locker Inc. FL jumped 16.1% after the athletic shoe retailer reported a net profit and provided an upbeat sales outlook. Shares of .GameStop Corp. GME rose 20.5% on Wednesday after individual investors piled into long-term call options for the video game retailer, reigniting its shares’ rally.
-Jamie Chisholm contributed reporting to this article.
-Joy Wiltermuth -Isabel Wang
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and the Wall Street Journal.
(END) Dow Jones Newswires
11/29/23 1627ET
Copyright (c) 2023 Dow Jones & Company, Inc.