Dow Hits New High: US Stocks Rise, Inflation Data and Fed Policy in Focus

Dow Hits New High: US Stocks Rise, Inflation Data and Fed Policy in FocusUS stocks closed higher overnight, with the Dow Jones Industrial Average hitting a new record high, up 0.99% to reach a new milestone

Dow Hits New High: US Stocks Rise, Inflation Data and Fed Policy in Focus

US stocks closed higher overnight, with the Dow Jones Industrial Average hitting a new record high, up 0.99% to reach a new milestone. The Nasdaq Composite gained 0.27%, and the S&P 500 rose 0.30%. Trading this week is shortened due to the Thanksgiving holiday, and investors are focused on the upcoming release of October's Personal Consumption Expenditures (PCE) price index and the minutes from the Federal Reserve's last monetary policy meeting. These data points will offer a clearer picture of the inflation and interest rate outlook.

Beyond macroeconomic data, the market is also assessing the impact of the incoming administration's cabinet nominations, particularly the choice for Treasury Secretary. Large tech stocks showed mixed performance. Amazon's share price rose over 2%, while Apple, Meta, and Google all gained over 1%; however, Nvidia fell over 4%, Netflix dropped over 3%, and Tesla declined almost 4%. Notably, Tesla's exclusion from California's proposed electric vehicle purchase subsidy program could impact future sales and its stock price.

In terms of sectors, chip and energy stocks performed strongly. AMD surged over 15%, Plug Power jumped over 14%, GlobalFoundries gained over 5%, JinkoSolar rose over 4%, and Daqo New Energy increased over 3%. This rally reflects continued investor optimism in these sectors. In stark contrast, the gold sector declined significantly, with spot gold plummeting over 3%, and several gold mining stocks experiencing substantial losses. Coeur Mining and Harmony Gold both fell over 4%, Kinross Gold dropped over 3%, and AngloGold Ashanti fell nearly 3%. This may be linked to a stronger dollar and increased investor risk appetite.

Cryptocurrency-related stocks also faced market volatility, with MicroStrategy's share price falling over 4%. News emerged that the company acquired 55,500 bitcoins for approximately $5.4 billion last week. Following this announcement, Bitcoin's price dropped over 4%, falling below $94,000, resulting in over 160,000 liquidations. MicroStrategy saw a further decline of over 3% in after-hours trading, exacerbating market concerns about the cryptocurrency sector.

Chinese stocks also showed mixed performance, with the Nasdaq Golden Dragon China Index closing up 0.44%. Popular Chinese stocks saw varied results, with Alibaba, Baidu, and New Oriental all rising over 2%; however, Nio fell over 3%, XPeng Motors dropped over 2%, and NetEase declined over 1%. These individual stock movements likely reflect their respective performance and market expectations.

The White House stated that President Biden will attend the incoming president's inauguration, somewhat easing political uncertainty. Investment bank Barclays holds an optimistic outlook for the S&P 500, predicting it will reach 6600 by the end of next year.

The Fed's interest rate outlook is again a key market focus. Investors will closely watch Wednesday's release of the October PCE price index, the Fed's preferred inflation gauge. The minutes from the Fed's last monetary policy meeting will also be released before Thanksgiving, providing crucial insights into the Fed's future monetary policy direction. Citigroup's rate strategists recommend the Fed pause rate cuts, contradicting the bank's economists, who still expect a 50-basis-point cut in December. The divergence in market expectations regarding the Fed's monetary policy adds further uncertainty.

The market is also closely monitoring the composition of the incoming president's administration and its potential impact on the US economy. The incoming president has announced the nomination of Scott Besent, founder of hedge fund KeySquare Group, as Treasury Secretary. Investors generally reacted positively to this choice, believing Besent may help moderate some of the incoming president's protectionist policies, thus providing support for the stock market. XTB analyst Kathleen Brooks noted that the dollar fell after the nomination announcement, reflecting the positive market sentiment towards Besent. Besent is seen as an antidote to [the incoming president's] most extreme economic views, she said.

Federal Reserve official Kashkari stated that a December rate cut is a reasonable consideration and hinted that the neutral rate might be higher, implying less stringent policy constraints. However, he emphasized that geopolitical risks are the primary consideration for the economic outlook and declined to comment on the Treasury nominee, urging the government to put the US on a sustainable fiscal path.

International gold prices fell sharply, with COMEX gold futures down 3.16% to close at $2,626.4 per ounce; COMEX silver futures fell 3.15% to close at $30.35 per ounce. Crude oil prices also declined, with January WTI crude futures down $2.30, or 3.23%, to close at $68.94 per barrel; January Brent crude futures fell $2.16, or 2.87%, to close at $73.01 per barrel. NYMEX December natural gas futures rose 7.67% to close at $3.3690 per million British thermal units.

The easing of tensions in the Middle East is a significant factor influencing crude oil prices. Media reports suggest that the US and France plan to announce a ceasefire agreement between Hezbollah and Israel within 36 hours. However, a State Department spokesperson stated that an agreement "has not yet been reached" and negotiations are ongoing. Despite this, officials from the US National Security Council and the Lebanese Parliament's deputy speaker both indicated that the two sides are "close" to an agreement, and Israeli media reported that the Israeli National Security Cabinet will meet on the 26th to approve a ceasefire agreement. A senior official from the Palestinian Islamic Resistance Movement expressed welcome for a Lebanon-Israel ceasefire.

On November 25th, the G7 foreign ministers' meeting took place in Italy, addressing the humanitarian crisis in Gaza, the situation in Lebanon, the Israeli-Palestinian conflict, and the war in Ukraine. The meeting included the Arab League secretary-general and representatives from several Middle Eastern countries and is expected to produce a joint communiqu on the 26th. These international events and diplomatic efforts will have a significant impact on global markets.