Most of Wall Street rose Thursday following its big rally from the day before on excitement that several cuts to interest rates may indeed be coming next year. The S&P 500 gained 0.3% to pull within 1.6% of its all-time high set early last year. The Dow Jones Industrial Average climbed 158 points, or 0.4%, to set a record for a second straight day, and the Nasdaq composite rose 0.2%.
Moderna jumped 9.2% after reporting encouraging data from a study of its treatment for high-risk melanoma that’s used with Merck’s Keytruda. That helped offset a 6.3% slump for Adobe, which gave a forecast for 2024 revenue that fell short of analysts’ expectations.
Stocks have been broadly shooting higher since October on hopes that inflation has cooled enough for the Federal Reserve to not only stop its market-rattling hikes to interest rates but to even begin considering cutting them. Those hopes strengthened Wednesday after the Fed held its main interest rate steady and said the federal funds rate is likely at or near its peak.
Our view is that the market is pricing too fast a pace of cuts, said Solita Marcelli, chief investment officer America at UBS Global Wealth Management.
All told, the S&P 500 rose 12.46 points to 4,719.55. The Dow gained 158.11 to 37,248.35, and the Nasdaq climbed 27.59 to 14,761.56.
The recent rally for stocks and drop for Treasury yields seem to be banking on the Federal Reserve pulling off what was considered a long shot not long ago.
The hope is that the Fed can manage its interest-rate policy exactly right: first, by slowing the economy and hurting investment prices enough through high interest rates to snuff out high inflation, and then by making conditions easier at the right time to prevent the economy from slowing too much and sliding into a painful recession.
That’s still not assured, as both Fed officials and cautious investors are warning.
One threat is that the economy stays too hot, which would keep upward pressure on inflation and could force the Fed to keep rates high for longer than expected.
A couple reports on Thursday indicated the economy may be stronger than economists had forecast. One showed U.S. shoppers spent more at retailers in November than October, when economists were forecasting a decline. Another report said fewer U.S. workers applied for jobless benefits last week, a signal of a resilient job market.
In stock markets abroad, indexes were mixed across Europe and Asia. Japan’s Nikkei 225 slumped 0.7% as hopes for U.S. rate cuts drove the value of the dollar down against the yen. That can hurt Japanese exporters.
