Expectations of a policy pivot from the Fed push Wall Street closer to a historic peak

The US stock market ended the trading session on December 3 (early morning of December 4, Vietnam time) with green spreading on Wall Street, as investors reacted positively to a series of mixed economic data but reinforced expectations that the US Federal Reserve (Fed) will soon cut interest rates. Signals from the labor market are weaker than expected, along with growing confidence that the Fed will "pivot" policy at the upcoming meeting, bringing stock indexes close to historical peaks.

Wall Street surges, nears record high on hopes of Fed rate cut soon

The S&P 500 closed up 0.30% and is now just 0.6% away from its all-time high set in late October. The Dow Jones Industrial Average jumped 408 points, or 0.86%, to 47,882.90. The Nasdaq Composite edged up 0.17%, despite pressure from tech stocks.

The biggest boost to the S&P 500 came from Microchip Technology, which rose 12.2%, the biggest gainer in the index. The company said its fourth-quarter revenue and profit likely came in at the top end of its forecast range, helped by a pickup in activity and lower inventories. CEO Steve Sanghi said the situation was “significantly better than initially expected.”

Meanwhile, the technology sector recorded a negative trading session. Microsoft fell as much as 3% after the news that it had cut sales quotas for AI software because many sales staff did not meet their targets. Although the company later denied it, the stock still closed down 2.5%, contributing to the 0.4% decline of the S&P 500 technology sector. This was also one of the two rare sectors in the red during the trading session.

Energy stocks were the focus of positive news, rising 1.8%, helped by a rebound in oil prices. Small-cap stocks in the Russell 2000 index also rose nearly 2%, continuing a strong performance after last week's 5.5% gain, their best performance in more than a year.

The day's batch of economic data continued to provide important impetus to the market. The ADP National Employment Report showed that the private sector unexpectedly recorded a decrease in employment in November, a sign that the market believes the Fed has more reason to abandon its tightening stance.

Meanwhile, the Institute for Supply Management (ISM) services activity index edged up slightly from 52.4 to 52.6 in November, while input costs declined, though remained high. The data came as the Fed's preferred inflation gauge, the personal consumption expenditures (PCE), was delayed by the 43-day government shutdown.

According to CME's FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points at its December meeting has increased to 89%, compared with 87% previously.

“The weaker labor market data is reinforcing the view that the Fed may be moving away from its hawkish stance, which is clearly what the market is pricing in,” said Keith Buchanan, senior portfolio manager at Globalt Investments.

The market also reacted to news that the Trump administration abruptly canceled interviews with a candidate for Fed chairman, raising expectations that Kevin Hassett, who is seen as a strong supporter of interest rate cuts, could replace Chairman Jerome Powell in May 2025.

In addition to Microchip Technology, a series of other stocks also recorded strong increases:

- Marvell Technology rose 7.9% after announcing a $3.25 billion deal to buy Celestial AI.

- American Eagle Outfitters rose 15.1% on raising its holiday sales forecast.

- Many stocks in the S&P 500 basket set new highs, with 27 codes reaching 52-week peaks.

On the New York Stock Exchange and Nasdaq, the number of stocks advancing outnumbered the decliners by 2.88:1 and 2.73:1, respectively. However, the overall market liquidity remained lower than the 20-day average, reflecting cautious sentiment ahead of the important data series about to be released.

The December 3 trading session showed that investors are "repositioning" their portfolios according to the possibility of the Fed cutting interest rates, a factor that could promote cheaper capital costs, support corporate profits and stimulate economic growth.

However, some risks remain: Tech stocks could come under pressure if revenue falls short of expectations, especially for companies with high hopes for AI; Upcoming economic data, especially the PCE and official employment reports, could cause market volatility if they deviate from forecasts; Interest-rate sensitive stocks such as banks, real estate, and financials could benefit strongly if the Fed does loosen.

As global markets prepare for the holiday season, trading on December 3 reflected a balance between optimism and caution. Wall Street is very close to a historic peak, but the next move will depend largely on the monetary policy signals from the Fed.

With the belief that a rate cut cycle is approaching, investors remain positive, but are ready to respond to economic variables that may appear in the following days.

Source: https://thoibaonganhang.vn/ky-vong-xoay-truc-chinh-sach-tu-fed-day-pho-wall-ap-sat-dinh-lich-su-174607.html