S&P 500 Tops 4,400 as Stock Rally Powers Ahead

News November 10, 2023 at 02:50 PM
Share & Print

Stocks extended their November rally as Treasury volatility abated, with traders looking past disappointing consumer-sentiment data and the Federal Reserve's efforts to downplay the market's dovish bid.

The S&P 500 hit the key 4,400 mark, seen by some chartists as a resistance level that would pave the way for more gains, if crossed. The gauge climbed over 1% and was on track for a seven-week high.

The Nasdaq 100 rose 2% as Microsoft Corp. climbed toward a record and Nvidia Corp. rallied for an eighth straight day. Ten-year yields were little changed, following a surge triggered by a weak 30-year bond sale and Jerome Powell's "sterner" tone on policy.

"Calm in the Treasury market" is what a sustained market rally would require, said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. "Short, sharp declines are no more beneficial for stocks than short, sharp rises."

Wall Street continued to keep an eye on the latest remarks from U.S. officials, with Fed Bank of Atlanta President Raphael Bostic saying policymakers can return inflation to their goal without the need to hike further.

His San Francisco counterpart Mary Daly said the U.S. central bank may need to hike its benchmark lending rate again if progress on inflation stalls while the economy roars ahead. Data Friday showed consumer long-term inflation expectations hit a 12-year high, while economic concerns weighed on sentiment.

Traders should expect the Fed to highlight its commitment to the 2% inflation target, but the rise in long-run inflation expectations indicate consumers are not convinced the Fed can fulfill its inflation mandate, according to Jeffrey Roach, chief economist for LPL Financial.

"The consumer is feeling stretched between the twin pains of inflation and higher interest rates, making them less optimistic about their current and future economic prospects," said Damian McIntyre, portfolio manager and head of multi asset solutions at Federated Hermes.

bloomberg chart showing Stocks Have Tracked The Rate Market's Volatility Since March

Emotional Reactions

Investors have softened their emotional reactions to data in recent weeks, with significantly less volatility, and we expect the same with the possibility of a government shutdown next week if a spending deal is not struck," according to Mark Hackett, chief of investment research at Nationwide.

"Historically, shutdowns have been short in duration and limited in economic or market impact," he noted.

The caution that pervaded equity markets in the past three months has now switched to "year-end greed" on expectations of a decline in US bond yields, according to Bank of America Corp.'s Michael Hartnett.

Global stocks recorded inflows of $8.8 billion in the week through Nov. 8, according to the note citing EPFR Global data. Still, cash remains the asset class of choice, Hartnett said. About $77.7 billion went into money market funds in the week, setting them up for record annual inflows of $1.4 trillion.

"We see upside for equity indexes, supported by earnings growth among quality companies," said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. "Overall, we believe 2024 should be a good year for investors who put their money to work in balanced portfolios, with positive prospective returns across stocks, bonds, and alternative investments."

Meantime, investors who piled into long dollar positions on the hopes of a hawkish Fed are rapidly selling out of one of the most-crowded trades this year, according to Bank of America strategists including Ralf Preusser and Meghan Swiber.

"USD FX overweights have been cut back dramatically, and the change in sentiment has been the most pronounced since early 2021," they wrote.

Elsewhere, the euro was little changed after European Central Bank President Christine Lagarde said that keeping the deposit rate at 4% should be enough to tame inflation, but officials will consider raising borrowing costs again if they need to.

Bitcoin hovered near $37,000 — the highest price in 18 months. Oil advanced, but was still set for a third straight weekly drop on growing concerns over global demand and the unwinding of the Israel-Hamas war's risk premium.

Corporate Highlights

T. Rowe Price Group Inc. said clients will likely withdraw more than $26.3 billion in the fourth quarter, extending a streak of redemptions by investors ditching actively managed mutual funds for cheaper products or cash money-market holdings.

Trade Desk Inc., a digital advertising platform, gave a weak revenue forecast for the current quarter, sending a warning flare about the health of the ad market.

Hydrogen producer Plug Power Inc. reported worse-than-expected third quarter earnings and issued a going-concern warning.

Country Garden Holdings Co. posted its biggest sales drop in at least six years as customers' concerns about its ability to complete projects threaten to exacerbate a cash crunch at the defaulted Chinese developer. This story was produced with the assistance of Bloomberg Automation.

(Credit: Adobe Stock) 

Copyright 2023 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Related Stories

Resource Center