Dow Jones advances to annual high
Weak US economic data creates such a positive mood on Wall Street that the Dow climbs to a new high for the year. Some investors are already betting on the Fed's first interest rate cut in January. At least the top central banker is not stifling hopes.
Weak economic data at the end of the week fueled hopes on Wall Street that interest rates in the USA will soon fall and caused share prices to rise. In line with this, the recent rally in bond prices showed no signs of tiring, meaning that market interest rates fell sharply once again. The ten-year yield now stands at 4.21%, compared with a high for the year of just under 5% in mid-October. Economic activity in the US manufacturing sector contracted for the 13th consecutive month in November, which was taken by the market as a sign of the effectiveness of the interest rate hikes.
The fact that the interest rate hikes are likely to be over was also signaled by US Federal Reserve Chairman Jerome Powell. He remained cautious in his comments during a speech and said that "it would be premature to conclude with confidence that we have reached a sufficiently restrictive stance or to speculate about when monetary policy might be loosened". However, he also said that the recent decline in inflation and the gradual slowdown in wage growth were proof that the Fed's rate hikes were successful. On the interest rate futures market, the probability of the first rate cut in March rose from 41.5% to 55%. A rate cut as early as January is priced in with a 10 percent probability, compared with 4 percent the previous day.
The Dow Jones Index rose by a further 0.8 percent to a high for the year of 36,245 points. The record high of 36,952 points from January 2022 is thus gradually coming into view. The S&P 500 gained 0.6 percent and the Nasdaq indices rose by a similar amount. According to initial data, there were 2456 (Thursday: 1685) price gainers and 436 (1161) price losers on the Nyse. A total of 40 (71) shares closed unchanged.
Dollar recovery halted
The dollar, which had been on the road to recovery, reversed course with falling market interest rates and fell again. Ultimately, it ended the day little changed against the euro. Gold benefited from the falling interest rates, as this made it a relatively more attractive investment. The price rose by 35 dollars to 2072 per troy ounce. Apart from a brief outlier in May, this is the highest level of the year.
The oil price fell by a good 2 percent. The additional production cuts agreed at the Opec+ meeting had already fizzled out the previous day and were even acknowledged with falling prices. According to market experts, the market reaction points to concerns because the announced cuts are voluntary. This is a sign that it is becoming increasingly difficult to agree on group-wide measures and raises doubts that the agreed production cuts will be implemented by the individual cartel members.
"We suspect that Opec+'s next move will be to increase production and that all announced voluntary cuts will be gradually reversed by the end of 2024," said Bill Weatherburn, commodities expert at Capital Economics.
Pfizer under pressure
Pfizer shares fell significantly by more than 5 percent. The pharmaceutical giant suffered a setback in the study of a slimming drug and terminated the study. Tesla fell by 0.5 percent and was unimpressed by the fact that four years after presenting its first pick-up model, the Cybertruck, Tesla has now started deliveries. According to market experts, the Cybertruck is more interesting from a marketing point of view than as a profit generator.
Uber Technologies rose by 1.7 percent. This was driven by speculation about the inclusion of the share in the S&P 500 index after the passenger transportation service provider qualified for inclusion in the index with its recent positive quarterly figures. It could be announced after the close of trading as part of the quarterly review of the index, according to reports.
Marvell Technology lost 5.3 percent after the manufacturer of memory, telecommunications and semiconductor products announced a better-than-expected loss for the third quarter. Dell (-5.2%) was another very weak technology stock. The computer manufacturer had disappointed on the sales side.
The recent declines in US market interest rates have led some investors to speculate about the Federal Reserve's potential for an interest rate cut as early as January, given the weak economic data and the effectiveness of the interest rate hikes. Jerome Powell, the chairman of the Federal Reserve, while being cautious in his comments, acknowledged the recent decline in inflation and the gradual slowdown in wage growth as evidence of the success of the Fed's rate hikes.
As a result of the falling interest rates, the dollar's recovery was halted, and investors turned to gold, which became a relatively more attractive investment due to the lower interest rates. The price of gold reached its highest level of the year, surpassing the level from May.
Source: www.ntv.de
