S&P 500 Sets 55th Record High This Year
In the midst of global investors keeping a close eye on the historic upheaval within South Korea’s political landscape, the U.S. stock market continues to show signs of a rising tide, albeit one that is somewhat fatigued. The S&P 500 index and NASDAQ have recorded fresh historical peaks yet the actual growth remains modest.
As of Tuesday’s market close, the S&P 500 climbed a mere 0.05% to reach 6049.88, marking its 55th record close of the year to date. The NASDAQ Composite saw a more pronounced gain of 0.4%, closing at 19480.91, while the Dow Jones Industrial Average dipped slightly by 0.17% to 44705.53.
What’s propelling the technology titans forward is the market’s anticipation surrounding interest rate cuts and the prospect of a soft landing for the economy. The latest JOLTS job openings report revealed a robust 7.744 million available positions in October, beating expectations that projected 7.49 million.
Cory Stahle, an economist at the Indeed Hiring Lab, remarked that the latest JOLTS report reflects an optimal scenario amid a cooling labor market that is nearing that elusive economic soft landing. With layoffs remaining low and both job openings and resignation numbers on the rise, it indicates that confidence is improving for both employers and job seekers alike.
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According to the CME's FedWatch Tool, traders on Tuesday ramped up expectations regarding a potential interest rate cut from the Federal Reserve in two weeks, raising the probability from 61% on Monday to nearly 10 percentage points higher.
Jeffrey Roach, chief economist at LPL Financial, commented on the anticipation surrounding the Federal Reserve's decision on December 18, suggesting that if the majority of committee members prioritize employment, the market should brace for a drop in policy interest rates, thereby bolstering risk appetite.
Looking ahead to Wednesday’s trading day, market participants have their eyes on the upcoming ADP employment data, while Fed Chair Jerome Powell is expected to deliver a public address. Furthermore, the non-farm payroll report for November is set to be unveiled ahead of Friday’s market open.
As for the tech giants, Tuesday marked another day of predominantly positive performance. Apple shares increased by 1.28%, Microsoft only marginally by 0.05%, Amazon rose by 1.3%, NVIDIA gained 1.18%, and Alphabet's Class C shares edged up by 0.02%. However, controversy surrounding Elon Musk's compensation package triggered a 1.59% drop in Tesla’s stock, while Meta saw an impressive rise of 3.51%, contrasting sharply with Intel, which plummeted 6.1% amid uncertain prospects.
Vanguard's chief economist, Joe Davis, expressed concerns over the market's extreme concentration within technology and AI stocks. He cautioned that while the implications of AI may one day mirror the wide-scale adoption of computers seen in the 1980s, this year's frenzy among investors has vastly overstated the short-term potential of the technology, elevating the likelihood of a price correction.
The NASDAQ Golden Dragon China Index gained a significant 1.16% on Tuesday, marking its fourth consecutive day of rise, with smaller Chinese companies outpacing the larger internet giants in their performance.
By the close of trading on Tuesday, Alibaba dipped 0.31%, JD.com fell 0.99%, Baidu was down 0.62%, and Pinduoduo lost 0.54%. However, stocks tied to the "millet economy" concept, like Miniso, surged by 9.64%, JinkoSolar rose by 7.13%, New Oriental climbed 6.54%, and NIO advanced by 5.45%. Tuya Smart and Futu Holdings also saw increments of 5.17% and 3.4% respectively.
Unquestionably, the spotlight remained on the MSCI Korea ETF (EWY), which was characterized by volatility, witnessing a drop exceeding 7% within the trading session before ultimately closing down by 1.59%.
Turning to other developments, Tesla's third-largest personal shareholder, Liao Kaiyuan, recently indicated his decision to reduce his stake in the electric vehicle manufacturer, reallocating funds toward short-term U.S. Treasury bills. He disclosed plans to sell off Tesla shares in favor of increasing investment in 3-month Treasury bonds.
In an unexpected appearance at Amazon’s re:Invent conference, Benoit Dupin, Apple's Senior Director of Machine Learning and AI, revealed that Apple has been utilizing Amazon's customized chips to support services like Maps and Siri. Apple is also evaluating AWS's new AI training chip, Trainium2, for pre-training its own AI models.
In health news, the U.S. Centers for Disease Control and Prevention (CDC) announced that the E. coli outbreak linked to onions supplied by McDonald's has come to an end. In October, 14 U.S. states reported illnesses connected to McDonald’s hamburgers, with 104 people affected, resulting in one death and 34 hospitalizations. There are concerns that the actual number of infections could be significantly higher.
Lastly, news emerged regarding Meta exploring partnerships for nuclear power transactions. Reports stated that the tech giant is seeking to collaborate with partners to begin powering data centers with nuclear reactors in the early 2030s. Urvi Parekh, Meta’s Global Head of Energy, conveyed the company’s openness to various reactor sizes, types, and locations, expressing a desire to engage partners involved throughout the project lifecycle, sharing costs early in the development phase, and having purchase capability upon project fruition.
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