Nasdaq surpasses the 20,000-point threshold.
Following the newest data on consumer price inflation, traders are growing more convinced that the Fed will implement the following interest rate reduction as soon as December. This is predominantly fueling interest-sensitive tech stocks. Alphabet, Google's parent company, broke its previous record high.
The US inflation report for November triggered a tech surge on Wall Street. However, the overall scenario was mixed: while the tech-dominated Nasdaq surged 1.8% to 20,035 points, reaching over the 20,000 mark for the first time on Wednesday, the US benchmark index Dow Jones dropped 0.2% to 44,149 points. The broader S&P 500 climbed 0.8% to 6,084.
Consumer prices increased by 2.7% year-on-year, rising from 2.6% in October. Between October and November, prices increased by 0.3%. "Everything aligned with predictions," said David Miller, chief investment officer at Catalyst Funds. "It's extremely likely that the US Federal Reserve will proceed with a 25 basis point rate cut later this month."
The anticipation of monetary loosening lifted shares of firms like Alphabet, Nvidia, and Meta by up to 5.5%. Alphabet, Google's parent company, hit a new record high. Tech stocks often respond strongly to predictions of monetary easing as investments important to their growth become less costly.
Investors are also monitoring what central banks communicate about their forthcoming moves. Konstantin Oldenburger, an analyst at broker CMC Markets, remained cautious. "The 80-20 rule seems to apply to modern monetary policy as well: the last 20% of work to combat inflation takes 80% of the time," said Oldenburger. "Progress towards lower inflation is slowing down. Either the Fed accepts a higher inflation target or it pauses after next week's meeting." The latter is more probable, given the strong labor market. The US Federal Reserve is attempting to keep inflation in check with higher interest rates while also cooling the overheated job market.
Gamestop Skyrockets
At the commodities market, speculations about China's economic stimulus measures and the EU's decision to impose new sanctions on Russia aided oil prices to rise. North Sea Brent crude oil climbed 1.9% to $73.59 per barrel. The price of US WTI crude oil increased by 2.6% to $70.34. "I welcome the enactment of our 15th sanctions package, which specifically targets Russia's shadow fleet," wrote EU Commission President Ursula von der Leyen on X. The "shadow fleet" refers to ships flying foreign flags, which Russia uses to bypass the oil embargo imposed by the G7 in 2022.
Gamestop was a popular topic amid individual stocks. The struggling CD and DVD video game retailer reported a quarterly profit of $17.4 million, in contrast to a loss of $3.1 million in the same period last year. The stock increased by 7.6%. Tesla was also sought after due to strong business results in China, with its stock increasing by 5.9%. Mondelez, the food conglomerate, profited from a share buyback program, with its stock increasing by 2.2%.
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The US Federal Reserve's potential interest rate reduction in December, aimed at combating inflation, could positively impact the economy, as suggested by Miller. This reduction might boost the performance of interest-sensitive tech companies like Alphabet and others.
Investors' focus on central banks' communication about future actions indicates a sensitive relationship between the economy and monetary policies, as changes in these policies can significantly influence stock prices.
