The S&P 500 soared to a closing high for 2023 on Friday, extending November's rally into the new month.
The broad market index rose by 0.59%, ending the session at 4,594.63. The tech-heavy Nasdaq Composite advanced 0.55% to 14,305.03. The Dow Jones Industrial Average added 294.61 points, or 0.82%, to close at 36,245.50.
The Dow rose to another new high on Friday, bringing its 2023 gain to nearly 9.4%, after it notched a new 2023 high and capped off its best month in more than a year.
The S&P 500 closed at its highest level since March 2022. Stocks bringing the broad market index to these heights include Ulta Beauty and Boston Properties, which rose 10.8% and 11.2%, respectively. Paramount popped 9.8%.
Federal Reserve Chair Jerome Powell on Friday pushed back against the market's expectations for interest rate cuts ahead, saying it is "premature to conclude with confidence" that monetary policy is "sufficiently restrictive."
Yields fell as equities rallied during the day, even after Powell's cautious remarks as traders interpreted them as a signal that the central bank is at least done with hikes. The yield on the 10-year Treasury note fell more than 13 basis points to 4.213%.
"There's a trifecta of drivers here. The first is the inflation. Second is the Fed seeming like it may be stepping to the sidelines, and then third is this cooling in the economy that is starting to unfold, but at a very gradual pace," said Mona Mahajan, senior investment strategist at Edward Jones. "It's almost like a Goldilocks cooling. It's not too hot. It's not too cold. And that's exactly what markets are embracing."
Mahajan added that markets seem to be pricing in rate cuts, but not until the back half of 2024.
November's big rally was due in part to traders beginning to believe the Fed was done raising rates and that the central bank may even start cutting them in the first half of next year. The Fed next decides on rates on Dec. 13.
Friday's moves come on the heels of a blowout November rally. November's gains snapped a three-month losing streak. The S&P and Nasdaq rallied 8.9% and 10.7%, respectively, to notch their best monthly performances since July 2022. The Dow surged 8.8% for its best month since October 2022.
This week, the S&P 500 added 0.77%, while the Dow rallied 2.4%. The Nasdaq advanced 0.38%. It marked the fifth consecutive week of gains for the major averages.
This month is typically a strong one for equities, with Decembers that precede a presidential election generally delivering outsized returns.
"It's a seasonally strong period," said Bob Doll, chief investment officer at Crossmark Global Investments. "If the market still buys the notion that the Fed has solved the inflation problem and that they're going to cut rates next year, but that the economy's gonna be okay and earnings will be fine—and that's the consensus line at the moment—then that's good enough for stocks to go higher."
Stocks rally on Friday
Bank of America forecasts 5000 level for S&P 500 by the end of 2024
Bank of America thinks the benchmark S&P 500 thinks can reach the 5,000 by the end of next year, as Wall Street has already past a point of "maximum macro uncertainty."
Analyst Derek Harris wrote in a Friday note that markets have already "absorbed significant geopolitical shocks," and the Federal Reserve has has so far meaningfully helped tame inflation with rate hikes in 2023. The move higher would mark a roughly 10% increase from current S&P 500 support levels.
"Macro signals are muddled, but idiosyncratic alpha increased this year," Harris wrote. "We're bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted (as they are wont to do) to higher rates and inflation."
— Brian Evans
Deutsche Bank stands by NIO buy rating but slashes price target 31%
Deutsche Bank stood by Shanghai-based electric vehicle manufacturer NIO Inc. in a report out Thursday, rating the $12 billion stock a buy ahead of quarterly results due Dec. 5.
But the firm slashed its price target by 31% to $11 from $16. The new target still implies upside of 53% for NIO shares.
"Similar to earlier in the year, we think NIO must once again prove to investors that it can be a first-tier EV player," analyst Edison Yu wrote in a nine-page note. "Competition is only getting fiercer and we worry the management team has yet to exhibit the tenacity required to consistently take market share from incumbents ... but we do think a comeback is possible next year as the revamped sales strategy takes hold. Tactically, sentiment is very negative and can quickly change if management starts making more shareholder friendly moves (e.g., reduce costs, bring in more ecosystem partners)."
NIO's sponsored ADRs are off 25% in 2023 after plunging 69% in 2022.
— Scott Schnipper
This week's major Nasdaq winners
The Nasdaq Composite is one pace for 0.3% weekly gain following after a strong finish to November and start to the final trading month of 2023.
PDD Holdings is one of the best performers in the concentrated Nasdaq-100, with shares up nearly 22% week to date. Workday and Crowdstrike are also on track for big wins, with shares up about 15% and 12% respectively.
— Samantha Subin
Manufacturing data Friday is yet another sign of an economic slowdown, some investors say
Despite the recent rally in equities, some analysts remain cautiously optimistic about the broader health of the economy.
Data released earlier Friday showed that U.S. manufacturing remained at low levels in November, according to the Institute for Supply Management, which said that its manufacturing PMI was unchanged at 46.7 last month. November was the 13th straight month during which the PMI came out below 50, which is an indicator of a slowdown in manufacturing.
"This was a disappointing number, definitely. It fell below expectations. But what's important is that everything underneath also pointed to to significant slowdown," said Anna Rathbun, chief investment officer for CBIZ Investment Advisory Services, taking the report as another sign of an emerging economic slowdown in 2024.
"The slowdown on American spending has already begun," Rathbun said. "If we start seeing attrition in the labor force, is already a lagging indicator. It doesn't bode well for 2024."
According to Edward Jones' senior investment strategist Mona Mahajan, this anticipated economic slowdown could actually provide a "good setup" heading into 2024, however, as it proves the market has avoided a deep recession and fought inflation.
"The slowdown, in some ways, will help confirm the end of this cycle and the start of a new economic cycle," Mahajan said.
— Pia Singh
Oil falls more than 2% on OPEC skepticism, U.S. rig count
Oil prices continued their slide on Friday amid disappointment with OPEC+ production cuts and as U.S. oil rigs rose slightly week over week.
Oil has declined about 5% since Wednesday's close despite efforts by OPEC and its allies, OPEC+, to boost prices.
Seven OPEC+ member Thursday promised cuts of 2.2 million bpd for the first quarter of 2024, but traders