The Market Rises on Promising Economic Data: A Closer Look

The S&P 500 experienced a slight increase on Wednesday, driven by a series of positive economic data that boosted investor sentiment as the year came to a close. This article will delve into the key highlights and trends seen in the market.

The Dow saw a marginal gain of only 9 points, equivalent to 0.03%. Similarly, the S&P 500 registered a modest growth of 0.11%. The Nasdaq Composite emerged as the top performer with a 0.35% increase. Among the standout stocks in the S&P 500, Google-parent Alphabet stood out by gaining over 3% and reaching a new 52-week high. Other tech companies like Meta Platforms saw a 1% rise, and Tesla experienced a more modest growth of 0.5%. In contrast, FedEx faced challenges as the biggest laggard in the broader index, losing over 11%. The package delivery giant reported disappointing revenue outlooks for the fiscal year and second-quarter results that fell short of expectations.

Positive news came with the release of the December consumer confidence index, which exceeded economists’ projections. It rose to a level of 110.7, surpassing the estimated 104.5. This development showcases an increasing level of consumer optimism, contributing to the overall positive sentiment observed in the market.

Market Performance on Tuesday

During regular trading on Tuesday, stocks rose broadly. The S&P 500 climbed by 0.59%, approaching its record close and intraday high achieved in January 2022. The Nasdaq Composite, for the first time since January 2022, closed above the significant milestone of 15,000 points. Meanwhile, the Dow advanced by 251.90 points, or 0.68%, ultimately reaching a new record high. Notably, all three major indexes achieved their ninth consecutive winning day, highlighting the sustained upward trend. As the current levels indicate, the S&P 500 needs only a 1% gain to reach a new record.

Year-End Outlook

As 2023 draws to a close, all three major indexes are set to end the year on a positive note. The recent rally has propelled the S&P 500 to a 4.4% monthly gain and a 24.2% increase year-to-date. Similarly, the Dow has experienced growth of 4.5% in December and 13.3% through the entire year. The Nasdaq Composite displaying impressive numbers, is up 5.5% in December and a remarkable 43.4% for the year, positioning itself for its most prosperous year since 2020.

Despite this strong market performance, Kevin Gordon from Charles Schwab urges caution. While the market may seem robust on the surface, there is a “stealthy rotation” occurring beneath, which could continue into 2024. However, the euphoric reaction to the Federal Reserve’s December decision and frothy sentiment among investors may result in a short-term pullback. Hence, it is essential for investors to exercise judiciousness and avoid becoming overly exuberant.

The market has shown promising signs as it moves towards year-end. The positive economic data, along with sustained upward momentum, contribute to investors’ confidence. However, it is crucial to maintain a cautious approach, given the possibility of a pullback amidst the current market exuberance.


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