Wall Street experienced notable movements on Tuesday, November 28, 2023, amidst mixed messages from Federal Reserve officials about the future of interest rate hikes and potential rate cuts.
Key Points:
- 📈 Stock Market Movements: Wall Street advanced despite choppy trading, with the Dow Jones rising 0.24%, the S&P 500 gaining slightly, and the Nasdaq Composite up 0.29%.
- 💵 Dollar’s Decline: The U.S. Dollar reached a 3½-month low, influenced by Fed Governor Christopher Waller’s hints at potential rate cuts if inflation continues to ease.
- ⚖️ Fed’s Mixed Signals: While Fed Governor Waller suggested a halt in rate hikes and possible cuts, Governor Michelle Bowman indicated the need for further rate increases to target inflation.
Wall Street saw a day of advancement on Tuesday, with the Dow Jones Industrial Average climbing 83.51 points (0.24%) to 35,416.98, the S&P 500 slightly up by 4.46 points (0.098%) at 4,554.89, and the Nasdaq Composite increasing by 40.73 points (0.29%) to 14,281.76. This upward trend occurred amid a backdrop of fluctuating trading patterns, with the major indexes showing signs of uncertainty during the afternoon session.
The focus of investors turned towards the Federal Reserve as contrasting views emerged from its officials. Fed Governor Christopher Waller’s comments, expressing increasing confidence in the current interest rate’s ability to bring inflation down to the Fed’s 2% target, sparked market optimism. Waller’s suggestion that the Fed could consider rate cuts if inflation keeps easing led to a significant shift in market expectations. The probability of a 25 basis-point cut by March rose to nearly 33%, a notable increase from 21.5% just a day earlier, as per the CME Group’s Fedwatch tool.
In contrast, another Fed governor, Michelle Bowman, provided a more cautious perspective, highlighting the likelihood of further rate hikes to curb inflation. Despite Bowman’s stance, Waller’s comments seemed to have a more substantial impact on market sentiments, with traders increasingly betting on a rate cut by the Fed in the upcoming year.
In the currency markets, the U.S. Dollar witnessed a decline, hitting a more than 3½-month low. This was primarily due to Waller’s indications of a potential easing of the Fed’s policy rate in the months ahead if inflation continues its downward trajectory. The Dollar Index fell 0.398%, with significant movements in major currency pairs. EUR/USD went up by 0.34% to 1.099, USD/JPY decreased by 0.86% to 147.41, and GBP/USD experienced a 0.58% increase, trading at 1.2698.
The commodities sector also responded to these macroeconomic shifts. Gold prices saw an increase of 1.4%, reaching their highest level since May, and crude oil futures gained momentum. The possibility of OPEC+ deepening supply cuts and a storm-related drop in Kazakh oil output contributed to this trend. West Texas Intermediate (WTI) crude settled up by 2.07% at $76.41 per barrel, and Brent settled at $81.68, rising by 2.13%.
In the realm of digital assets, Bitcoin (BTC/USD) maintained a strong position, trading at $38,360 overnight. The cryptocurrency market saw significant inflows, with $346 million entering digital asset investment products in the last week, marking a continuous nine-week run of inflows. For Bitcoin, the inflows amounted to $312 million, bringing the year-to-date total to over $1.5 billion. This surge is largely attributed to the anticipation of spot BTC ETF approvals in the U.S., with Canada and Germany accounting for the majority of these inflows.
The market’s attention now turns to the upcoming U.S. October personal consumption expenditures report (PCE), which includes the core PCE, the Fed’s preferred inflation measure. This data will likely influence future market movements and provide further insight into the Fed’s monetary policy direction.
