US close: Dow hits new peak, S&P 500 nears record high as rally continues

The Dow Jones rose to another all-time high on Tuesday, while the S&P 500 neared record territory, as rate-cut hopes continued to fuel an end-of-year rally on Wall Street.

The Dow finished 0.68% higher at a new high of 37,557.92, its fifth straight record close in a row; the Nasdaq gained 0.66% to 15,003.22; while the S&P 500 rose 0.59% to 4,768.37, just 31 points off its 4,796.56 peak reached in January 2022.

The S&P 500 has now gained 2.6% since last Wednesday's Federal Open Market Committee (FOMC) meeting in which the so-called dotplot graph showed policymakers were projecting rate cuts of 0.75 percentage points throughout 2024.

However, central bankers are continuing to deliver mixed messages to the market. New York Fed president John Williams and Atlanta Fed head Raphael Bostic have both come out since last week's FOMC meeting to say that it is too soon to talk about rate cuts, while San Francisco Fed president Mary Daly said her own expectations for rates were "very close" to the dotplot graph released last week, which signalled three rate cuts in 2024.

On Tuesday, the head of the Richmond Fed, Thomas Barkin, said in an interview with Yahoo Finance that the central bank was making "good progress" on its fight against inflation, and that recent "data has come in pretty nicely". He cautioned from using the Fed's recent projections for interest rates as solid guidance, but said: "If you're going to assume that inflation comes down nicely, then of course we'd respond appropriately."

Nevertheless, inflationary pressures were back on investors' minds as oil prices continued to climb on Tuesday, with WTI crude up 1.5% at $73.58 a barrel, as shipping disruptions in the Red Sea sparked supply fears. Several shipping companies and oil giant BP have paused shipments through the key trading route as a result of a series of attacks by Yemen's Houthi rebels who are demanding a full ceasefire in Gaza.

"While in the short term, any price shock is likely to be temporary, if the situation becomes a more permanent state of affairs, or escalates, we could see prices continue to move higher," said Michael Hewson, analyst at CMC Markets.

Boeing bags Lufthansa orders

Boeing shares were higher on the back on an order for 40 737-8 MAX planes from Germany carrier Deutsche Lufthansa. The deal also includes purchasing options for a further 60 planes from Boeing.

Pharma stocks were performing well after a series of broker upgrades: Rhythm Pharma surged after Morgan Stanley raised its rating to 'overweight'; Arvinas was lifted by an upgrade by Wells Fargo to 'overweight'; while Amgen gained after BMO Capital Markets upped its recommendation to 'outperform'.

Google parent company Alphabet also finished in positive territory despite the news it will pay $700m and make allowances for greater competition in its Play app store, according to the terms of its recent antitrust settlement.