Wall St climbs on optimism about interest rate cuts

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Wall Street’s main stock indexes rose on Tuesday, building on strong gains in recent weeks as investors continued to bet on a policy pivot by the Federal Reserve next year.

The benchmark S&P 500 trades less than 1% shy of its all-time closing high as traders price in an aggressive timetable for interest rate cuts next year after Fed Chair Jerome Powell said at the US central bank’s policy meeting last week that its historic monetary tightening is likely over.

Despite attempts by policymakers to temper the optimism since the meeting, traders have priced in about 66% chance of the Fed cutting rates by 25 basis points in March, as per the CME Group’s Fed Watch tool, and cuts of 143 bps by December 2024.

The blue-chip Dow secured a new all-time high, while the Nasdaq 100 index hit a record high.

“The sentiment that things with the Fed are okay and that they are going to be accommodative next year with no real issues about further hikes or concerns around it have given the markets the last boost they needed,” said Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management in New York.

A Commerce Department report showed single-family homebuilding surged in November and could gain further momentum, with declining mortgage rates likely to draw potential buyers back into the housing market.

Investors are awaiting other economic data later this week including the final reading of third-quarter GDP and the monthly personal consumption expenditure index (PCE), the Fed’s preferred inflation gauge.

Richmond Fed President Thomas Barkin welcomed the retreat in inflation but refrained from saying how that affects his outlook for central bank interest rate policy next year, in an interview with Yahoo Finance.

Fed Atlanta President Raphael Bostic and Fed Chicago President Austan Goolsbee are scheduled to speak later in the day.

Bostic is a voting member in the FOMC’s rate-setting committee next year.

At 9:56 am ET, the Dow Jones Industrial Average was up 146.53 points, or 0.39%, at 37,452.55, the S&P 500was up 14.84 points, or 0.31%, at 4,755.40, and the Nasdaq Composite was up 53.42 points, or 0.36%, at 14,958.61.

Light trading volumes are expected to impact market moves in the run-up to the Christmas and New Year holidays.

Among single stocks, Accenture dipped 0.2% after the IT services provider issued a downbeat second-quarter revenue forecast, anticipating cautious spending by clients as macroeconomic uncertainty remains an overhang.

Boeing gained 0.7% after German airline Lufthansa said it ordered 40 737-8 MAX jets from the plane maker and agreed to 60 future purchasing options.

Kenvuen climbed 4.8% after a US court ruled in favor of the consumer health company in a lawsuit which said exposure to its pain-reducing drug Tylenol might contribute to autism or attention-deficit hyperactivity disorder during pregnancy.

PepsiCo slipped 0.3% after J.P. Morgan downgraded the stock to “neutral” from “overweight”, while Amgen rose 1.0% after BMO upgraded its rating on the drug-maker to “outperform” from “market perform”.

Advancing issues outnumbered decliners by a 4.94-to-1 ratio on the NYSE and 3.37-to-1 ratio on the Nasdaq.

The S&P index recorded 30 new 52-week highs and one new low, while the Nasdaq recorded 113 new highs and 39 new lows.