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Dow hits a record high following Fed’s nearly pivot rhetoric

Macro Scenes:  

  • Dow topped 37,000: Wall Street rallied sharply, extending a five-day winning streak following the Fed’s rate decision. The reserve bank kept the policy rate at the 5.25% to 5.50% target range unchanged. While this was widely expected, the Fed Dot Plot indicated three rate cuts to 4.6% by the end of 2024. Chair Powell said the interest rate was or near its peak at the afterward Press Conference, which further boosted risk-on sentiment, sending the Dow soaring to an all-time high level, the first time topping 37,000. Both the S&P 500 and Nasdaq are also inching away from their record highs.
  • Small caps jumped: Notably, the US small cap index, the Russel 2,000, surged 3.5% to the highest since August 2022. Fed’s nearly pivot rhetoric lifted these higher debts and higher multiples companies’ shares the most. In the meantime, Real Estate and Utilities sectors benefited the most from the event, up 3.6% and 3.7%, respectively, in the S&P 500.
  • Bond yields dived: The US government bond yields nosedived following the event, with the Fed Funds Rate-sensitive 2-year yield plunging 30 basis points at the deepest, the lowest since June.
  • The USD slumped: The US dollar weakened significantly as the dollar index fell below 103, buoying the other currencies. The Australian dollar and the Japanese Yen strengthened the most against the USD, both up 1.6%.
  • Gold and Silver surged: Precious metal prices jumped amid a weakened USD. Spot gold price was up nearly US$40 per ounce to just under 2,020. Silver soared more than 4%.  
  • Crude oil gained: Crude oil prices rebounded before the Fed meeting, and the event lifted them further. The price was initially boosted by a larger-than-expected draw of the US inventory.  
  • Bitcoin approached 43,000 again: Bitcoin returned to its bullish run amid risk-on sentiment, briefly touching 44,000 before pulling to just above 42,800.
  • Asian markets to open mixed: The Australian markets may take the most tailwind from Wall Street as futures were up 1.2%, the Hang Seng Index futures fell 0.56%, and Nikkei 225 futures rose 0.05%.

Chart of the Day:

Dow (Cash), daily – The index topped the previous high in November 2022, posting a potential bullish breakout. However, the RSI indicates an overbought signal, suggesting a near-term pullback could be on the horizon. If this doesn’t happen immediately, the momentum may take it to head further resistance of about 37,800.

Source: CMC Markets as of 13 December 2023

Company News:    

  • Adobe (NDX: ADBE) slipped 6% in after-hours trading due to its light guidance on the fiscal first-quarter guidance. The software company beat market expectations in both revenue and earnings per share in its fiscal fourth quarter, which recorded US$5.05 billion and US$4.27, respectively. However, it provided a guidance of US$4.35 to US$4.40 in earnings per share

Today’s Agenda:

  • NZD Q3 GDP: -0.3% q/q, est: 0.2%, pre: 0.9%
  • Australia’s employment change for November
  • SNB policy rate decision
  • BOE rate decision
  • ECB rate decision

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