The S&P 500 marked another milestone as it closed slightly higher on Friday, securing its longest weekly winning streak since 2017. This achievement was fueled by data indicating a more substantial decline in inflation than anticipated, which bolstered expectations of accelerated and deeper rate cuts by the Federal Reserve. As a result, the bullish sentiment continued to drive stock markets ahead of the long holiday weekend.
Market Performance at a Glance
By 16:00 ET (21:00 GMT), the S&P 500 Futures exhibited a 0.2% increase, Nasdaq 100 Futures showed a 0.2% rise, and the Dow experienced a minor drop of 18 points or 0.1%. These indices concluded an eighth consecutive positive week, a feat not seen for the S&P 500 since 2017 and the Dow Jones Industrial Average (DJIA) since 2019.
The report on personal consumption expenditures, considered the Federal Reserve's primary inflation metric, revealed a 0.1% slowdown in November. This brought the annualized inflation rate through November to 2.6%, falling below the expected 2.8%.
The core measure, which excludes the volatile food and energy costs and is a crucial gauge of underlying inflation, also decelerated to 0.1%, in contrast to the anticipated 0.2%. This data signaled a swifter decline in inflation and heightened expectations of an earlier rate cut by the Federal Reserve. According to Investing.com's Fed Rate Monitor Tool, the odds of a rate cut in March surged to 85%, up from 75% the previous day. Investors are now anticipating a total reduction of 175 basis points by the end of the next year, potentially bringing the Fed funds rate to a range of 3.5% to 3.75%. This forecast is significantly more aggressive than the three rate cuts for 2024 that the Federal Reserve had projected in its December meeting.
Corporate News Impact:
- Nike: Nike (NYSE:NKE) reported a weakened annual sales forecast, citing a cautious outlook on consumer spending, which led to a nearly 12% drop in its shares. The company now expects full fiscal-year revenue to increase by approximately 1%, down from the previous forecast of mid-single-digit percentage growth. Nike also revealed plans to reduce costs by up to $2 billion over a three-year period, equivalent to 50% of its annual demand creation expense budget. This cost-cutting strategy could potentially support mid-term growth and profitability.
- Tesla: Tesla (NASDAQ:TSLA) faced a slight decline as it initiated a recall of over 120,000 Model S and Model X vehicles in the U.S. due to the risk of cabin doors being unlocked during a crash, as reported by the country's road safety regulator on Friday.
Notable Market Developments:
- Karuna Therapeutics: Karuna Therapeutics Inc (NASDAQ:KRTX) experienced a substantial 48% surge in its stock price following the announcement of Bristol-Myers Squibb Company's (NYSE:BMY) acquisition deal valued at $14 billion.
- Rocket Lab USA: Rocket Lab USA, Inc. (NASDAQ:RKLB) disclosed that its subsidiary secured a lucrative contract worth $515 million from the U.S. government for the production and operation of 18 space vehicles. This development led to a 23% increase in its share price.
Conclusion
The S&P 500's extended winning streak underscored the market's resilience and optimism. The surprising drop in inflation, combined with expectations of accelerated rate cuts by the Federal Reserve, fueled investor confidence. In the corporate arena, notable developments from Nike and Tesla garnered attention, while Karuna Therapeutics and Rocket Lab USA made significant strides. The stock market continues to exhibit its dynamism and ability to respond to economic indicators and corporate news.
