US open: S&P 500 nears all-time high as stocks continue to rally

dl new york stock exchange us markets wall st wall street nyse dow jones industrial average sp500 trading unsplash — Sharecast / Aditya Vyas via Unsplash

US stocks were putting in decent gains on Tuesday morning, with the Dow Jones continuing to set new highs and the S&P 500 now within touching distance of its record, on the back of unrelenting optimism that the Federal Reserve will ease monetary policy significantly in the coming 12 months.

After an hour's trade on Wall Street, the Dow was up 0.49% at a new high of 37,490.4, on track for its fifth record close in five days; the Nasdaq rose 0.35% to 14,956.98; while the S&P 500 was up 0.36% at 4,757.43.

The S&P 500 specifically is now within 1% of its all-time high of 4,796.56 reached in January 2022, having now gained 2.5% since the Federal Open Market Committee's (FOMC's) meeting last Wednesday the so-called dotplot graph showed policymakers were projecting rate cuts of 0.75 percentage points throughout 2024.

"Markets continue to weigh up the possibility that last week’s FOMC-led surge may have been built on false hopes of a bumper year of easing ahead," said Joshua Mahony, analyst at Scope Markets, with several policymakers coming out over recent days to temper expectations for rate cuts in 2024.

"For now, markets remain steadfast in their approach, holding on to gains ahead of the key festive period. However, there is a feeling that we are pricing in a best-case scenario for 2024, and thus the risk appears firmly skewed towards potential disappointment."

Fed policymakers 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."

In economic news, US housing starts were higher than expected in November as mortgage rates began to soften, according to the Commerce Department. Housing starts surged by 14.8% in November to a seasonally-adjusted annual rate of 1.56 million and against expectations of a 1.36 million rise. They were also up 9.3% year on year.

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'.

Dow Jones - Risers

Walgreens Boots Alliance, Inc. (WBA) $25.50 2.10%
Caterpillar Inc. (CAT) $290.02 1.51%
Amgen Inc. (AMGN) $279.59 1.49%
Goldman Sachs Group Inc. (GS) $381.65 1.40%
American Express Co. (AXP) $185.04 1.25%
Nike Inc. (NKE) $122.64 1.24%
Boeing Co. (BA) $263.57 1.21%
Travelers Company Inc. (TRV) $185.35 1.06%
Dow Chemical Co. (DOW) $54.75 0.92%
Intel Corp. (INTC) $46.10 0.90%