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Dow Hits Yearly High, Tech Surges, and Dollar Rebounds – Impact on Federal Reserve’s Policy Shift


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

November witnessed robust stock market rallies with the Dow Jones surging to a new yearly high, marking an 8.9% gain while the S&P 500 and Nasdaq also experienced significant growth. Cooling inflation figures hinted at a potential shift in the Federal Reserve’s policy, driving investor optimism. Tech stocks like Nvidia, Tesla, Alphabet, and Meta dominated gains, albeit facing slight declines towards month-end. Simultaneously, the dollar rebounded against the euro due to position adjustments and surprising euro zone inflation data, influencing expectations of rate adjustments by both the Fed and ECB. Amidst various currency movements, the anticipation of key economic reports and Fed Chair Powell’s remarks played pivotal roles in market dynamics.

Stock Market Updates

In November, the stock market witnessed a strong rally, with the Dow Jones Industrial Average surging to a new yearly high and closing at 35,950.89, marking an impressive 8.9% gain for the month. The S&P 500 also experienced substantial growth, climbing 8.9%, while the Nasdaq Composite, though slightly lower by 0.2%, still managed a solid 10.7% advance. This surge was primarily fueled by cooling inflation figures, indicating a potential shift in the Federal Reserve’s monetary policy. Despite the broader market’s gains, some profit-taking in Big Tech stocks caused a minor dip in the Nasdaq on Thursday. However, positive earnings reports from Salesforce, driven by its robust cloud data business and AI product, boosted the Dow alongside leading healthcare companies like UnitedHealth Group, Johnson & Johnson, Merck, and Amgen.

The market sentiment was buoyed by indications that inflation might be stabilizing, as the personal consumption expenditures price index rose by 3.5% year-over-year, slightly lower than the previous month’s 3.7% increase. This trend led investors to speculate that the Federal Reserve could potentially halt rate hikes and even consider rate cuts by 2024. Additionally, the 10-year Treasury yield, after reaching above 5% the previous month, dipped to 4.34% in response to the cooling inflation figures, elevating confidence in equities. Technology stocks had dominated November’s gains, with Nvidia, Tesla, Alphabet, and Meta showcasing substantial increases throughout the month, though some investors chose to realize profits as November drew to a close, resulting in slight declines for these tech giants on Thursday.

Data by Bloomberg

On Thursday, across the various sectors, the market showed a general upward trend with an overall gain of 0.38%. Notably, Health Care exhibited the most substantial growth, rising by 1.25%, followed closely by Industrials and Financials, which saw increases of 1.07% and 1.02%, respectively. Materials and Consumer Staples also experienced notable gains at 0.97% and 0.83%. Real Estate and Energy sectors showed moderate growth at 0.83% and 0.64%, respectively. Conversely, Information Technology experienced a slight dip at -0.08%, while Consumer Discretionary and Communication Services showed more significant declines of -0.17% and -1.01%, respectively.

Currency Market Updates

In the latest currency market updates, the dollar rebounded at month-end, benefitting from position adjustments and a surprising drop in eurozone inflation compared to forecasts. Despite soft U.S. economic data, including personal income, spending, and core PCE figures, EUR/USD declined by 0.7%. The market’s anticipation of Federal Reserve Chair Jerome Powell’s forthcoming comments and the impending jobs report next week contributed to the dynamics. The dollar index experienced a 0.7% decline while finding support near the 61.8% retracement of the July-October advancement, yet the rebound was capped by the 200-day moving average at 102.57.

EUR/USD’s downward movement overlooked the subdued U.S. economic data, alongside expectations in the futures market of potential earlier and more substantial European Central Bank (ECB) rate cuts compared to the Fed’s projections for next year. The bearish trend in 2-year bund-Treasury yield spreads, diverging from rising EUR/USD prices since mid-November, added to the downward pressure. The currency pair may find support around the previous week’s low of 1.08525 and the November 17 swing low, as investors await further U.S. data.

Additionally, other major currencies reacted to the dollar’s resurgence: Sterling fell by 0.58%, while USD/JPY rose by 0.65% in its month-end rebound. These movements were influenced by technical levels, such as Fibonacci retracements, and the interplay between key moving averages. The broader scenario was influenced by the anticipation of yield spread dynamics between the Treasury and JGB (Japanese Government Bonds) and the Fed’s gradual shift towards easing, contributing to the possibility of substantial losses into 2024. Economic events such as the U.S. ISM manufacturing data for November, Powell’s policy comments, ISM non-manufacturing, JOLTS, and Friday’s non-farm payrolls report were anticipated as market movers in the coming days.

Economic Data
CurrencyDataTime (GMT + 8)Forecast
CADEmployment Change21:3014.2K
CADUnemployment Rate21:305.8%
USDISM Manufacturing PMI23:0047.9

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