On Friday, major US benchmark equity indices experienced a notable uptick, with markets eagerly anticipating the Federal Reserve's forthcoming monetary policy decision, set to be announced next week. The Dow Jones Industrial Average and the Nasdaq Composite both recorded a rise of 0.7%, closing at 41,393.8 and 17,684, respectively.
Meanwhile, the S&P 500 saw an increase of 0.5%, finishing at 5,626. All sectors achieved gains, with utilities and communication services leading the charge. Over the course of the week, the Nasdaq marked a remarkable nearly 6% increase, while the S&P 500 advanced by 4%. The Dow followed with a commendable rise of 2.6%.
The upcoming two-day meeting of the Federal Open Market Committee is set to commence on Tuesday, creating additional anticipation among investors. Current predictions indicate there is a 51% chance that the FOMC will decide to lower its benchmark lending rate by 25 basis points this Wednesday. Conversely, the rest of the probabilities favor a more aggressive reduction of 50 basis points, as mapped out by the CME FedWatch tool.
Jefferies, a prominent brokerage firm, has voiced expectations that policymakers will opt for a 25 basis points cut. In their Friday note to clients, Jefferies noted, 'We anticipate a significant change in the language of the policy statement, which will reflect a shift in the balance of risks towards the downside for the labor market, coupled with greater confidence in meeting the FOMC's 2% inflation target over time.
This adjustment will pave the way for further rate cuts in subsequent meetings.' Shifting to economic indicators, the yield on the US two-year note fell by 5.9 basis points, settling at 3.59%, while the ten-year yield dropped by 2.1 basis points, ending at 3.66%. These movements highlight the market’s response to changing economic sentiments. Consumer sentiment in the US surged to its highest level since May, with preliminary data from the University of Michigan’s Surveys of Consumers revealing a drop in year-ahead inflation expectations to the lowest reading since December 2020.
This marks a significant turnaround in consumer confidence and economic outlook. On the commodities front, West Texas Intermediate crude oil prices climbed 0.4% to reach $69.25 per barrel, positioning the commodity for a weekly gain. Despite warnings from the International Energy Agency about a marked slowdown in global oil demand growth, attributed to a cooling Chinese economy, crude prices have continued to recover from a three-year low, according to a report from Saxo Bank. In the realm of company-specific news, Warner Bros.
Discovery ($WBD) shares surged nearly 11%, marking it as the top performer on both the S&P 500 and the Nasdaq indices. This positive performance followed the announcement of a multiyear distribution agreement with Charter Communications ($CHTR), aimed at integrating linear video with streaming services.
In response, Charter shares experienced a modest rise of 0.3%. Conversely, Boeing ($BA) faced the steepest decline on the Dow, recording a 3.7% drop and landing among the worst performers on the S&P 500. This decline occurred after the International Association of Machinists and Aerospace Workers voted unanimously to reject a tentative labor deal with the aerospace giant.
In another setback, Adobe ($ADBE) shares fell by 8.5%, also the largest drop on the S&P 500 and Nasdaq, after the software company's fiscal Q4 revenue outlook failed to meet Wall Street expectations, despite reporting stronger-than-anticipated Q3 results. On the commodity markets, gold prices increased by 1.2%, reaching $2,611.20 per troy ounce, while silver prices rose by 3.2%, hitting $31.08 per ounce.
These movements indicate a continued investor interest in precious metals amidst a fluctuating economic landscape. In summary, as we head into a pivotal week marked by the Federal Reserve’s policy decision, the market’s response reflects a complex interplay of consumer sentiment, economic indicators, and corporate earnings, setting the stage for intriguing developments in the financial landscape..