Stock Market Today: Nasdaq Leads Gains Amid AI Optimism and Rate Cut Expectations
Market Performance
On Friday, December 13, 2024, the U.S. stock market is showing mixed performance, with technology stocks leading the way. As of the latest data:
– The S&P 500 (SPX) is up 0.3% at 6,069.40
– The Nasdaq Composite (COMP) is outperforming, rising 0.5% to 20,002.35
– The Dow Jones Industrial Average (DJI) is struggling to break its losing streak, up just 0.1% at 43,958.56
This follows a challenging session on Thursday, where all three major indexes closed lower. The S&P 500 dropped 0.5% to 6,051.25, the Nasdaq Composite fell 0.7% to 19,902.84, and the Dow Jones Industrial Average shed 0.5% to 43,914.12.
Driving Factors
AI Optimism: The market’s positive sentiment is largely driven by continued enthusiasm for artificial intelligence (AI) technologies. Chipmaker Broadcom (AVGO) has provided a significant boost to the tech sector after forecasting quarterly revenue above Wall Street estimates and predicting booming demand for its custom AI chips.
Interest Rate Expectations: Investors are increasingly confident about a potential interest rate cut by the Federal Reserve. The CME FedWatch tool shows a 96.4% probability of a 25 basis point cut in December, up from 66% at the beginning of last week. If realized, this would bring the total reduction in the Fed funds rate to 1% in 2024.
Economic Data: Recent economic indicators have been mixed. The producer price index (PPI) for final demand rose 0.4% in November, higher than the expected 0.2%. Year-over-year, PPI increased 3%. Initial jobless claims also increased more than anticipated, rising by 17,000 to 242,000 for the week ended December 7.
Major Stock Movements
Several stocks are making significant moves today:
1. Broadcom (AVGO): Up 15% following its strong forecast and AI chip demand outlook.
2. Marvell Technology (MRVL): Rising 5.6% in sympathy with Broadcom’s positive news.
3. Nvidia (NVDA): The AI bellwether is up 1.1%, continuing its strong performance.
4. Micron Technology (MU): Gaining 2% amid the positive sentiment in the chip sector.
5. Salesforce (CRM): Up 1.8% after an upgrade to “overweight” from KeyBanc.
Upcoming Market Events
Investors should keep an eye on these upcoming events that could impact market performance:
1. Federal Reserve Meeting: The Fed’s next meeting is scheduled for December 17-18, where a potential rate cut decision will be closely watched.
2. Earnings Reports: While specific dates weren’t provided, investors should monitor upcoming earnings releases from major companies for insights into corporate performance and economic health.
3. Economic Data Releases: Upcoming reports on inflation, employment, and consumer spending will be crucial for assessing the economy’s direction and potential Fed actions.
Market Outlook
As 2024 draws to a close, the stock market is on track for impressive gains. The S&P 500 is poised to climb more than 25% this year, potentially marking the first time the index has produced a total return above 25% in two consecutive calendar years since the late 1990s.
However, market breadth remains a concern. The S&P 500 has seen more stocks declining than advancing for nine consecutive sessions, a phenomenon not observed since September 2001. This narrow market leadership, primarily driven by large-cap tech stocks, could potentially lead to increased volatility in early 2025.
Conclusion
As we approach the end of 2024, the stock market continues to be driven by AI optimism and expectations of a more dovish Federal Reserve. While major indexes are near record highs, investors should remain vigilant about potential risks, including narrow market breadth and mixed economic signals. As always, a diversified portfolio and a long-term investment strategy remain prudent in navigating the ever-changing financial landscape.
