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The Dow and other major indexes all saw a positive close to begin the week as the December Fed meeting beckons.
The Dow Jones Industrial Average (DJIA) jumped Monday to close around 500 points higher ahead of crucial fiscal metrics. The leading index gained ground on some of the steep losses suffered last week as investors await a critical Federal Reserve meeting. The positive Dow development comes on the cusp of a new inflation data release.
The Dow added 528.58 points, or 1.58%, to close at 34,005.04, representing its first-ever close above 34,000 since December 2nd. Meanwhile, the other major indexes also finished higher, with the S&P 500 gaining 1.43% to 3,990.56 and the Nasdaq Composite climbing 1.26% to 11,143.74.
A rise in Boeing shares (NYSE: B.A.) also helped the Dow’s latest ascent. This development follows reports that the company is closing in on a deal with Air India. Weighing in on the generally pleasing performances of the Dow and the other two major indexes, BMO Wealth Management chief investment strategist Yung-Yu Ma said:
“Today’s action is mostly a reflex bounce after last week’s poor performance. There’s probably some cautious optimism ahead of tomorrow’s CPI report, but also some underlying concern. We can see that concern today in an up market for equities that actually has the VIX rising quite sharply.”
Pointing out the market’s choppiness as an inverse relationship between US-based and Europe-based stocks, Ma also added:
“Europe, which outperformed last week, is down today while the U.S. is bouncing. It speaks to a choppy market with low conviction; strong markets have better uniformity.”
Dow Higher Close on Anticipation of Favorable CPI Report & Rate Hikes
Traders will look to take inflation cues from the November consumer price index (CPI) expected on Tuesday. Suggestions are that inflation is slowing, and investors should hope that November’s CPI corroborates this sentiment. Also, on Tuesday, the US Federal Reserve will begin a two-day meeting and will most likely announce another rate hike on Wednesday. Observers expect a smaller increase than in the preceding months, corroborating Fed’s previous hints.
In addition to a smaller rate hike (50 basis points), the Fed’s updated economic projections could also foretell its economic plans. Furthermore, all ears would be keenly listening in on Chair Jerome Powell’s press conference for signals on the apex bank’s move in the coming months. Suggesting what is in store, chief investment officer for Cornerstone Wealth, Cliff Hodge, stated:
“Financial conditions have eased dramatically since the October CPI reading released last month, so the Fed will likely use the December FOMC meeting to walk those back.”
Hodge also explained that Powell might take a more hawkish approach.
Traditional Stocks & Energy Stocks on The Mend?
Last week was a losing one for all three major indexes. The Dow and S&P 500 suffered their worst weekly losses since September, declining 2.77% and 3.4%, respectively, while the Nasdaq shed 4%. This week’s climb should relieve investors who hope for more gains as the days unfold.
Meanwhile, there was other positive news in the energy sector, with stocks rising on steadying oil prices. This climb also came about following several weeks of declines.