Stocks Rally as Yields Dip and Market Breadth Widens

After briefly falling to their lowest level in two months, yields rebounded, contributing to a rise in stocks on Wednesday. The Dow Jones Industrial Average saw a gain of 178 points, or 0.5%, while the S&P 500 climbed 0.4%. The Nasdaq Composite also advanced, with an increase of 0.5%.

The positive momentum of the November market rally extended into the Thanksgiving holiday. Over half of the stocks trading on the New York Stock Exchange registered gains on Wednesday, indicating a widening of market breadth. Additionally, the tech-heavy Nasdaq saw greater participation, as 63.7% of the stocks in the index rose.

In Wednesday’s trading session, small- and mid-cap stocks outperformed, with a rise of 0.6%. On the other hand, the energy sector experienced a loss of 0.6% after OPEC decided to delay a meeting on production cuts that was originally scheduled for the weekend. As a result, APA Corp, Marathon Oil, EOG Resources, and Devon Energy all tumbled by more than 1%.

The yield on the 10-year Treasury briefly fell to its lowest level since September 22, reaching 4.369% on Wednesday morning. However, it managed to recover and trade slightly higher at 4.433%. This decrease in yield is notable, as it follows the crossing of the 5% mark in October for the first time in 16 years.

The latest meeting notes from the Federal Reserve indicated that monetary policy will remain restrictive, with no indication of interest rate cuts in the near future. Despite this, investors remain optimistic that the central bank will not raise rates at its December meeting, according to fed funds futures trading.

Chipmaker Nvidia reported its latest quarterly results after the bell on Tuesday. The company posted fiscal third-quarter adjusted earnings and revenue that surpassed expectations. However, the warning of export restrictions on China potentially affecting its fiscal fourth quarter caused shares to fall by 4.2% on Wednesday.

The November rally, marked by significant gains in the Nasdaq Composite, paused on Tuesday, bringing an end to the five-day winning streak for the S&P 500 and Nasdaq Composite. The Dow also closed lower. Despite this pause, all major averages remain on track for monthly gains. The Nasdaq has rallied by 11% in November, while the Dow has advanced nearly 7%, and the S&P 500 is up more than 8%.

With the possibility of a soft landing from the Fed and inflation trending downwards, Charlie Ripley, senior investment strategist at Allianz Investment Management, expressed optimism for the market, stating, “I’d probably be leaning more towards the camp that this rally could continue a little bit longer. Against that backdrop, as we head into 2024, I think equities will continue to perform pretty well.”

With the New York Stock Exchange closed for Thanksgiving on Thursday and an early closing on Friday, investors will eagerly wait to see if the market rally resumes its upward trajectory next week.

World

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