The First Slice for Wednesday, December 20, 2023

The U.S. stock market continues to climb, with the S&P 500 index on the cusp of reaching a new record high. Investors are in high spirits, anticipating possible Federal Reserve interest rate cuts next year and observing the steady performance of the economy. The Dow Jones has already achieved record closes recently, and now the S&P 500 is just under 1% away from its previous record. This benchmark closed at a record 4,796.56 on January 3, 2022.

The Dow Jones Industrial Average went up 251.9 points, or 0.7%.
The S&P 500 finished up 27.81 points, or 0.6%.
The Nasdaq Composite ended up 98.03 points, or 0.7%.

Investors are encouraged by the prospect of the Federal Reserve beginning to reduce interest rates by spring next year, and positive signs in the economy are contributing to this optimism. Richmond Fed President Thomas Barkin mentioned “good progress” in the fight against inflation, although he also emphasized that it’s too early to provide specific details about interest rate cuts. Despite some Fed officials expressing reservations about lowering borrowing costs in the near term, equity investors remain upbeat for now.

The housing market is also in focus, with November housing starts showing a robust 14.8% increase, the highest reading since May, while building permits fell 2.5% in November. This performance suggests that investors are juggling two trading themes: the expectation of rate cuts driving stocks higher and confidence in a strong economy.

As we look ahead, the question on many minds is whether the S&P 500 will indeed reach a new record high. The chances seem favorable, but the timing remains uncertain. This optimism is echoed by global fund managers who hold a positive view of the stock market, reminiscent of the market’s state in January 2022 when the S&P 500 achieved its previous record close……….[read more]