The S&P 500 climbed on Monday as investors tried to continue Wall Street’s year-end momentum.
The broad market index gained 0.39% to close at 4,622.44, its highest closing level since March 2022. The Dow Jones Industrial Average advanced 157.06 points, or 0.43%, to finish the session at 36,404.93 — its highest close since January 2022. The Nasdaq Composite added 0.20% to 14,432.49.
The S&P 500 and Nasdaq are coming off their sixth straight weekly gain. This week, investors are looking ahead to key inflation data, which could affect market movements and rate policy from the Federal Reserve. The central bank begins its two-day meeting Tuesday.
In terms of key economic data, November’s consumer price index reading is due Tuesday, while the producer price index is set for release on Wednesday. The forthcoming data releases are some of the final obstacles left for markets to remain strong into the end of 2023.
“No one expects a hike, but hotter-than-expected inflation readings could throw cold water on the idea that rate cuts are coming sooner rather than later,” said Chris Larkin, head of trading and investing at E-Trade.
Macy’s shares rallied more than 19% on news the retailer received a buyout offer for $5.8 billion. Tech stocks Apple and Nvidia pulled back 1.3% and 1.9%, respectively, limiting the Nasdaq’s gains. Shares of Meta Platforms ticked down 2.2%.
The Fed is expected to maintain the fed funds rate steady in the 5.25%-5.5% range. Chair Jerome Powell is also expected to reiterate his commitment to lowering inflation in his press conference on Wednesday. Fed funds futures pricing suggests a roughly 40% likelihood that the central bank will lower rates by a quarter of a point in March.
Bank stocks unlikely to catch a bid as credit losses loom in 2024, Morgan Stanley says
Bank stocks are cheap but unlikely to rally so long as investors anticipate a surge in bad loan losses in 2024, Morgan Stanley analysts led by Manan Gosalia wrote to clients Monday.
Current stock prices reflect an assumption that loan loss provisions will reach 1% of average loan ratios “across the group for 2024, which is 2x levels seen during the Tech Bubble and 3x [the] 2015-2016 peak,” and twice Morgan Stanley’s own assumptions for next year, the analysts said.
Warning signs are piling up. Nonaccrual commercial real estate loans for banks covered by Morgan Stanley jumped 40% in the third quarter compared with the second, and about 140% year-to-date. At the same time, “defaults on high-yield bonds have begun to rise. Given that [net charge-offs] have historically moved in tandem with HY bond defaults,” that’s likely to mean net charge-offs on commercial and industrials loans “will rise in the coming quarters.”
More worrying still is that easier monetary policy in 2024 won’t help, because in past credit cycles, net charge-offs by banks “have continued to increase even after the Fed begins to cut” interest rates, Morgan Stanley said. The bearish bottom line for investors is that bank stocks don’t win higher price-to-earnings multiples “when credit is deteriorating.”
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WATCHLIST+
SPDR S&P Regional Banking ETF is down 17% in 2023.
— Scott Schnipper, Michael Bloom
11 HOURS AGO
Muni funds attracting new cash in tax-loss harvesting season
Investors appear to be shifting some cash into municipal bond funds as they square their books for the end of the tax year.
According to FactSet, the municipal bond ETF category has seen nearly $3 billion of net inflows over the past month. The iShares National Muni Bond ETF (MUB) has led the way, with nearly $1 billion of inflows, and has also seen its share price rise by more than 3% over that time period.
The cash could be coming from investors who are selling out of their losing positions for tax purposes. Read more about how municipal bond funds can fit within a tax-loss harvesting strategy
— Jesse Pound
11 HOURS AGO
More than 50 S&P 500 companies make fresh 52-week highs
A slew of S&P 500 names reached their highest levels in a year Monday, as the market tried to keep its six-week winning streak going. Overall, 52 S&P 500 components made new 52-week highs. Here’s a look at some of them:
- T-Mobile traded at all-time highs back to the MetroPCS IPO in April, 2007
- Booking Holdings traded at all-time highs back to its IPO in April 1999
- Chipotle Mexican Grill traded at all-time high levels back to its IPO in January 2006
- D.R. Horton traded at all-time high levels back to its IPO in June 1992
- Lennar traded at all-time high levels back to when it began trading in 1971
- Lululemon traded at all-time highs back to its IPO in July 2007
- Marriott International traded at all-time high levels back through its spin-off from Marriott Corp in 1993
- NVR, Inc. traded at all-time high levels back to post-bankruptcy IPO in Nov 1993
- Royal Caribbean trading at levels not seen since Feb, 2020
- Boeing trading at levels not seen since June, 2021
- Cintas trading at all-time high levels back to its IPO in 1983
- Fastenal trading at levels not seen since Jan, 2022
- FedEx trading at levels not seen since Aug, 2021
- WW Grainger trading at all-time high levels back to when it began trading in 1967
- Huntington Ingalls trading at levels not seen since Nov, 2022
- Howmet Aerospace trading at all-time highs back to its Alcoa spinoff in Nov, 2016
- Ingersoll-Rand trading at all-time high levels back through our history to 1972
— Fred Imbert, Chris Hayes
11 HOURS AGO
Oil prices largely flat as investors remain wary
Oil prices were were little change Monday as investors navigate growing production with softening demand.
The West Texas Intermediate contract for January rose 9 cents, or .13%, to settle at $71.32 a barrel. The Brent crude contract for February gained 19 cents, or .25%, to settle at $76.03 a barrel.
Oil futures have booked seven straight week of losses amid record production in the U.S., a weakening economy in China, and a lack of confidence in the ability of OPEC+ to balance the market.
— Spencer Kimball
12 HOURS AGO
Semiconductor ETFs are outperforming
Semiconductor-focused funds were surging on Monday despite the top stock in the sector struggling.
The iShares Semiconductor ETF (SOXX) was up 3.2% in afternoon trading. The VanEck Semiconductor ETF (SMH) climbed 2.2%.
The gains for chip funds came even as Nvidia slumped more than 2%. Broadcom and Advanced Micro Devices helped offset Nvidia, rising 8.8% and 3.8%, respectively.
— Jesse Pound
12 HOURS AGO
Stocks making the biggest moves midday
Check out some of the companies making headlines in midday trading.
Macy’s — Shares jumped 21% after Macy’s, according to sources, received a buyout offer for $5.8 billion from two investment firms. Other department store chains also rose on the report, with shares of Nordstrom and Kohl’s each gaining more than 5%.
Cigna Group, Humana — Cigna Group reportedly ditched its attempt to acquire competitor Humana after the two failed to agree on price. Cigna shares advanced 16%, while Humana shares slid 1.6%.
Shake Shack — Shares of Shake Shack jumped 7.4% after the company announced CEO Randy Garutti will retire from his position in 2024.
