US close: Stocks rise but Fed's Williams dampens rate-cut hopes

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US stocks finished mostly higher on Friday, with the Dow scoring its third record close in a row, though gains were modest as earlier optimism surrounding future interest-rate cuts was dampened by New York Fed Bank president John Williams.

In an interview with CNBC, Williams said that policymakers "aren’t really talking about rate cuts right now". He said: "I just think it’s just premature to be even thinking about that."

The Dow Jones Industrial Average closed up 0.15% at a new all-time closing high of 37,305.16, while the S&P 500 slipped 0.01% and the Nasdaq gained 0.35%.

Markets had risen strongly over the past two sessions after the Federal Open Market Committee's so-called dotplot graph pointed to rates ending 2024 at the 4.625%, down from the current 5.25-5.5% level. That implies three separate 25 basis-point cuts before the end of next year, compared to just two cuts in September's dotplot.

US Treasuries have surged over recent weeks, with bond-buying intensifying over the past two days after the FOMC meeting, pushing the yield on a 10-year note below the 4% mark for the first time since August. Yields finished down 0.9 basis points at 3.913% by the close.

"Given the sharp move in bond markets since Wednesday it was perhaps felt necessary to pour a little cold water on the moves of the last 48 hours, with Williams sent out to say it was premature to be thinking in terms of rate cuts," said analyst Michael Hewson from CMC Markets.

"That’s not to say they wouldn’t happen next year but to be pricing in between five to six rate cuts next year as markets appeared to be doing seems to be a case of getting a little carried away."

In economic data on Friday, a flash reading of S&P Global's US manufacturing PMI fell to 48.2 in December, the lowest level seen in four months, compared to 49.4 in November and forecasts of 49.3. The services PMI rose to 51.3 in December, up from 50.8 in the previous month and beating expectations for a reading of 50.8,

Meanwhile, US industrial production rose by just 0.2% in December, missing the consensus estimate of 0.3%, as October's data was revised lower to show a 0.9% decline in output, compared with the initial estimate of -0.6%.

Citigroup finished in the red on reports it is to shut down its municipal bond-trading business. In an internal memo seen by the Wall Street Journal, the bank said it was closing the unit down by the end of March 2024, saying operations were "no longer viable given our commitment to increase the firm’s overall returns".

Wholesale retail giant Costco was a standout performer, gaining over 4% after beating forecasts with its first-quarter figures, helped by a better-than-expected Black Friday and Cyber Monday performance. The company declared a special dividend of $15 per share as it reported a 6% rise in revenues to $57.8bn.

Streaming group Roku fell nearly 7% after analysts at MoffettNathanson cut their rating on the stock from 'neutral' to 'sell, while STMicroelectronics was given a lift by UBS which upgraded the chip group from 'neutral' to 'buy'.

Dow Jones - Risers

Boeing Co. (BA) $263.48 2.83%
Intel Corp. (INTC) $46.12 2.08%
Salesforce.Com Inc. (CRM) $261.59 1.70%
American Express Co. (AXP) $180.75 1.06%
Microsoft Corp. (MSFT) $369.80 1.06%
Cisco Systems Inc. (CSCO) $49.82 0.77%
JP Morgan Chase & Co. (JPM) $165.23 0.76%
Home Depot Inc. (HD) $353.68 0.53%
Nike Inc. (NKE) $121.59 0.47%
Walmart Inc. (WMT) $152.74 0.37%