[New York Stock Market] First Trading Day of the Last Week of the Year Ends Higher... S&P Nears Previous High

The major indices of the U.S. New York stock market all closed higher on the first trading day of the last week of the year, December 26 (local time), within a narrow range. Amid ongoing expectations for a Santa rally, the S&P 500 index approached its all-time high (4796.56) recorded in January 2022.

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 0.43% (159.36 points) to close at 37,545.33. The large-cap-focused S&P 500 index increased by 0.42% (20.12 points) to 4,774.75, and the tech-heavy Nasdaq index gained 0.54% (81.60 points) to reach 15,074.57. The market was closed on Monday due to the Christmas holiday.

All 11 sectors of the S&P 500 index advanced. Intel rose more than 5% following foreign media reports that it will build a new factory in Israel. Manchester United climbed over 3% on news that British billionaire Jim Ratcliffe purchased shares. Apple closed slightly lower amid reports that it appealed the U.S. International Trade Commission (ITC) decision to ban Apple Watch sales in the U.S. Tesla rose more than 1% despite news of a vehicle recall.

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Investors are watching closely to see if the New York stock market can finish the last week of 2023 on an upward trend. The S&P 500 has risen for eight consecutive weeks through last week, approaching the previous high of 4796.56 recorded in January 2022. The key question is whether it can surpass this level during the current week.

Currently, the market outlook is divided between expectations that the Santa rally will continue this week, supported by hopes for interest rate cuts next year, and concerns that profit-taking from the rally may occur. Since 1950, the S&P 500 has averaged a 1.3% gain during the Santa rally period. Chris Larkin of Morgan Stanley eTrade said, "The key is whether the market can maintain momentum into the new year," adding, "It depends on how long the positive sentiment surrounding the possibility of rate cuts can last."

Expectations that the Fed will begin cutting rates next year have been a major factor supporting the recent stock market. Robert Kaplan, former president of the Dallas Federal Reserve Bank, appeared on CNBC and said, "One reason we got stuck with inflation problems is that the Fed kept policy too loose for too long," and added, "The Fed will not want to make the same mistake by being too restrictive," supporting rate cuts.

Economic data released late last week also reinforced these rate cut expectations and hopes for a soft landing. The November core PCE price index, the Fed's preferred inflation gauge, rose 3.2% year-over-year, marking the smallest increase since April 2021. Amid continued easing inflation, November durable goods orders increased 5.4% month-over-month, far exceeding Wall Street expectations of 2.0%. Tom Lee, founder of market research firm Fundstrat and a prominent Wall Street bull, said in an investor memo, "The overall inflation narrative is supporting the stock market."

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market reflects more than an 80% probability that the Fed will cut rates by at least 0.25 percentage points in March. The probability of a rate cut at the next meeting in January is also confirmed at the 14% level.

In the New York bond market, the benchmark 10-year U.S. Treasury yield fell to around 3.89%. The 2-year yield, which is sensitive to monetary policy, is trading near 4.35%. The dollar index, which measures the value of the U.S. dollar against six major currencies, is down more than 0.2% at around 101.4.

The economic data released on this day showed strength. The S&P CoreLogic Case-Shiller 10-city home price index rose 4.8% year-over-year in October, the highest level since 2023 began. The Chicago Fed National Activity Index for November turned positive at 0.03, indicating that economic growth is above its long-term average.

Oil prices rose on news of attacks on ships in the Red Sea. At the New York Mercantile Exchange, February delivery West Texas Intermediate (WTI) crude oil prices closed at $75.57 per barrel, up $2.01 (2.73%) from the previous day. This closing price is the highest since November 30.