Market Optimism Grows over Potential US Federal Reserve Interest Rate Cut
Optimism in the market about a potential US Federal Reserve (Fed) interest rate cut next year has surged, leading to a decline in US bond yields to multi-month lows. Major US stock indexes opened higher on Wednesday (29) as a result of this growing confidence.
Before the deadline, the Dow Jones Industrial Average saw a rise of over 70 points, or almost 0.2%, while the Nasdaq Composite Index surged almost 130 points, nearly 0.9%. The S&P 500 Index also experienced a jump of almost 0.6%, and the Philadelphia Semiconductor Index soared more than 2%.
Major index futures were higher before US stocks opened on Wednesday after the latest US economic data reinforced investor speculation that the US economy is continuing to grow despite aggressive tightening measures by the Federal Reserve.
The yield on the two-year US Treasury note, known for its sensitivity to interest rates, fell below 4.7%, and the yield on the 10-year US Treasury note decreased to 4.3%. These changes reflect expectations of a 25 basis point interest rate cut next May.
Influential US Economic Data
The US Department of Commerce reported on Wednesday the revised value of US gross domestic product (GDP) for the third quarter. The revised annual rate of real GDP growth in the third quarter was 5.2%, surpassing economists’ expectations and the initial value of 4.9%. This increase is the most significant in two years.
The price index of core personal consumption expenditure (PCE) in the third quarter also had a revised quarterly annual growth rate of 2.3%, slightly below economists’ expectations of 2.4%. However, the PCE quarterly annual growth rate revision was 3.6%, higher than anticipated and the previous value.
John Leiper, an analyst at Titan Asset Management, emphasized that these data underscore the sustained strength of the US economy. Despite expectations of a slowdown in the fourth quarter, Leiper expressed confidence that this year’s robust performance will remain unaffected.
Global Bond Surge
Meanwhile, global bonds are experiencing the fastest surge since the 2008 financial crisis. November’s rebound has been fueled by speculation that the Fed and its global counterparts have largely completed raising interest rates and are now poised to begin cutting rates next year.
The market estimates that the US will cut interest rates by a full percentage point next year, with the interest rate reduction cycle expected to commence in June.
Andrew Brenner, an analyst at NatAlliance Securities, commented that if more investors start to believe that the Fed’s interest rate hike cycle has ended and focus shifts to potential rate cuts, this shift in sentiment could exert enough downward force on US bond yields.
Stocks in Focus
- General Motors (GM-US): The share price of General Motors rose 11.04% to $32.08 in early trading on Wednesday. The company announced several investor-focused moves aimed at regaining Wall Street’s confidence following a disruptive year.
- Adobe (ADBE-US): Adobe saw a 0.66% rise in early trading to $627.43 a share. The company is set to refute EU antitrust charges in a closed hearing on December 8.
- Dollar Tree (DLTR-US): Dollar Tree’s share price surged 3.50% in early trading to $120.10. The company’s third-quarter results fell short of expectations, leading to a downward revision in its full-year sales forecast.
Key Economic Data of the Day
The revised annual rate of US third quarter GDP growth exceeded expectations, while the revised annual rate of US PCE growth in the third quarter also showed upward momentum. These economic indicators reinforce the prevailing market optimism about the strength of the US economy.
Wall Street Analysis
In a recent report, Moody’s highlighted the heightened environmental credit risk faced by 16 industries, compared to just nine industries in 2015. The report emphasized the significant impact of environmental stress on industries such as oil and gas, mining, and chemicals, citing the potential credit impact on total industry debt amounting to $82 trillion.
Written by a professional journalist for a newspaper.
Market optimism about a US Federal Reserve (Fed) interest rate cut next year has grown, US bond yields have fallen to multi-month lows, and major US stock indexes opened higher on Wednesday (29 ).
Before the deadline, the Dow Jones Industrial Average rose more than 70 points or almost 0.2%, the Nasdaq Composite Index rose almost 130 points or almost 0.9%, the S&P 500 Index rose almost 0.6%, and the Philadelphia Semiconductor Index rose more than 2. %.
Major index futures were higher before US stocks opened on Wednesday after the latest US economic data reinforced investor speculation that the US economy is continuing to grow despite aggressive tightening measures by the Federal Reserve.
The yield on the two-year US Treasury note, which is more sensitive to interest rates, fell below 4.7%, and the yield on the 10-year US Treasury note fell to 4.3%. Exchanges fully reflect expectations of a 1-cent (25 basis point) interest rate cut next May.
The US Department of Commerce announced on Wednesday the revised value of US gross domestic product (GDP) for the third quarter. The revised annual rate of real GDP growth in the third quarter was 5.2%, which is higher than the 5% and expected from economists. initial value was 4.9%, which was almost THE biggest increase in two years.
At the same time, the price index of core personal consumption expenditure (PCE) in the third quarter had a revised quarterly annual growth rate of 2.3%, below the previous value and economists’ expectations of 2.4%; PCE quarterly annual growth rate review was 3.6%, lower than the previous value and economists’ expectations of 2.4% 4% higher than economists’ expectations and the previous value.
John Leiper, an analyst at Titan Asset Management, believes these data highlight the continued strength of the US economy. He pointed out that although economic growth is expected to slow down in the fourth quarter, this will not affect this year’s strong performance, and the story of Merch Elen Pinfelen continues.
Separately, global bonds are surging at the fastest pace since the 2008 financial crisis. November’s rebound was fueled by growing speculation that the Fed and global peers have largely finished raising interest rates and will begin cutting rates this year next. The market estimates that the US will cut interest rates by a full percentage point next year, and the interest rate reduction cycle will begin in June.
Andrew Brenner, an analyst at NatAlliance Securities, said that if more people start to believe that the Fed has ended its interest rate hike cycle and is focusing on the next possible step to cut interest rates, there may be enough force to lower US bond yields.
From 22:00 Taipei time on Wednesday (29th): Stocks in focus:
General Motors (GM-US) rose 11.04% to $32.08 a share in early trading.
General Motors on Wednesday announced several investor-focused moves as it seeks to regain Wall Street’s confidence by 2024 after a year of disruption due to labor strikes and difficulties in its electric and self-driving plans. The company plans to raise its single quarter dividend by 33% next year to 12 cents a share; initiate $10 billion in rapid share buybacks; and restore its guidance for 2023, which includes approximately six weeks of UAW strikes Estimated earnings before interest and tax (EBIT ) impact of $1.1 billion.
Adobe ( ADBE-US ) rose 0.66% in early trading to $627.43 a share
Adobe will refute EU antitrust charges in a closed hearing on December 8. The European Union accuses its $20 billion acquisition of cloud designer platform Figma of harming competition. The European Commission warned two weeks ago that the deal could reduce competition in the global market for interactive product design software supplies. Market leader Figma is a competitor of Adobe.
Dollar Tree (DLTR-US) rose 3.50% in early trading to $120.10 a share
Dollar Tree’s third-quarter results fell short of expectations and on Wednesday it lowered its full-year sales forecast, saying continued inflation was weighing on demand for select items in its stores. The company also tightened its full-year profit forecast due to rising costs, causing the company’s shares to fall 2% in pre-market trading on Wednesday.
Today’s key economic data: The revised annual rate of US third quarter GDP growth was 5.2%, expected 4.9%, and the initial value was 4.9% The revised annual rate of US PCE growth in the third quarter was 3.6%, 4.0 is expected. %, and the initial value was 4.0% The third quarter core PCE quarterly growth rate was revised to 2.30%, expected to be 2.4%, and the initial value was 2.4% Wall Street analysis:
Moody’s said in a recent report that 16 industries currently face “high or very high environmental credit risk,” compared to just nine industries in 2015. Among those most affected are oil and gas, mining and chemicals, said the report. The credit rating agency examined the potential credit impact of environmental stress on 90 industries with a total debt of $82 trillion.
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