2023-12-19 04:08:00 ET
Summary
- The SPX index closed out the week at 4719.19, almost a 2.5% increase over where it closed the previous week.
- After the bulls were let loose on Wednesday, the S&P drifted slightly higher through the rest of the week as Fed officials sought to walk back some of the change in expectations for the course of how interest rates would change during 2024 they had unleashed.
- The CME Group's FedWatch Tool projects the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 20 March 2023 (2024-Q1).
The S&P 500 ( SPX ) rose for the seventh week in a row. The index closed out the week at 4719.19 , almost a 2.5% increase over where it closed the previous week.
Almost all of that upward movement came on Wednesday, 13 December 2023 after 2:00 PM, when the Federal Reserve first announced it would hold the Federal Funds Rate steady in a target range of 5.25-5.50%, then signaled in the following press conference by Federal Reserve Chair Jerome Powell that the U.S. central bank would pivot to cut interest rates in 2024. The change effectively reverses the expectation the Fed would continue following a more hawkish policy that had been voiced by Powell as recently as 1 December 2023.
After the bulls were let loose on Wednesday, the S&P drifted slightly higher through the rest of the week as Fed officials sought to walk back some of the change in expectations for the course of how interest rates would change during 2024 they had unleashed.
These changes are captured in the latest update of the alternative futures chart. We've also added a new redzone forecast range to account for the echoes of past volatility that arise from the dividend futures-based model 's use of historical stock prices as the base reference points from which it projects the potential trajectories of the S&P 500 into the future.
This new redzone forecast range assumes investors will shift their forward-looking focus from 2024-Q4, where we established it was in the previous edition of the S&P 500 chaos series, back toward 2024-Q1, which coincides with the expected timing of when investors anticipate the Fed will start cutting interest rates.
That change in the forward time horizon of investors wasn't the only expectation that changed during the past two weeks. The outlook for dividends has also substantially improved during the past month, as shown in the next chart .
Nearly all of the changes in the outlook for dividends in 2024 took place during the past two weeks.
Other things also happened during the trading week ending on Friday, 15 December 2023. Here is our summary of the week's market-moving headlines.
Monday, 11 December 2023
- Signs and portents for the U.S. economy:
- Speculation builds Fed officials will end quantitative tightening in 2024, Fed officials say Americans are right to be gloomy:
- Bigger stimulus, trouble developing in China:
- BOJ officials not quite ready to end never-ending stimulus:
- Nasdaq, S&P, Dow start week with gains as traders gear up for CPI data, Fed rate decision
Tuesday, 12 December 2023
- Signs and portents for the U.S. economy:
- Bigger trouble dodged in China, for now, while bigger stimulus develops:
- BOJ officials looking to keep never-ending stimulus alive a little longer:
- Nasdaq, S&P, Dow end higher after latest CPI report; focus turns to Fed rate decision
Wednesday, 13 December 2023
- Signs and portents for the U.S. economy:
- Expectations before the Fed officials' meeting:
- Fed officials to swing to rate cuts in 2024, noncommittal on ending quantitative tightening:
- Bigger stimulus developing in China:
- BOJ officials try to play coy after signaling the end of never-ending stimulus is coming:
- Bigger trouble developing in the eurozone:
- S&P, Nasdaq rise while Dow scales 37K for new record high after Fed sees rate cuts in 2024
Thursday, 14 December 2023
- Signs and portents for the U.S. economy:
- Fed officials expected to deliver rate cuts sooner:
- Bigger stimulus developing in China:
- BOJ officials looking to exploit Japan government political scandal:
- ECB, BOE officials claim they don't want to cut rates:
- Nasdaq, S&P, Dow end higher as Fed pivot rally continues despite some buying fatigue
Friday, 15 December 2023
- Signs and portents for the U.S. economy:
- Fed officials try to put a damper on the dovish pivot:
- Calls for bigger stimulus developing in China:
- Bigger trouble developing in the Eurozone:
- Nasdaq, S&P, Dow notch seven-week win streak after Fed's dovish pivot
The CME Group's FedWatch Tool projects the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 20 March 2023 (2024-Q1), six weeks earlier than expected a week ago, when the Fed is expected to start a series of quarter-point rate cuts at six- to twelve-week intervals through the end of 2024.
The Atlanta Fed's GDPNow tool 's estimate of real GDP growth for the current quarter of 2023-Q4 rose to an annualized growth rate of 2.6% after having held steady at a +1.2% growth rate during the preceding two weeks. The Atlanta Fed's nowcast increased thanks to reports of higher personal and government spending figures along with higher business investments in the past week.
This article is the last for the S&P 500 chaos series in 2023. We'll be back with a new edition covering the last weeks of December 2023 sometime early in 2024!
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
S&P 500 Jumps After Fed Pivots On 2024 Rate Cuts