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Stock market news today: US stocks hold onto gains as rate-cut hopes persist

exandra Canal and Karen Friar

Tue, Dec 19, 2023, 1:57 PM CST

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US stocks moved higher in afternoon trading on Tuesday, with an eighth weekly win still within reach as investors stayed upbeat on the prospect of interest rate cuts despite warnings those hopes are overdone.

The Dow Jones Industrial Average (^DJI) climbed roughly 0.5%, or nearly 200 points, while the benchmark S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) each ticked up about 0.4%.

The strong gains come as Federal Reserve officials tried to quell bets on a rate cut as early as March. They said it’s “premature” to be convinced the central bank is done with rate hikes and signaled its policy will still be data-driven.

Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards

Meanwhile, the Bank of Japan decided on Tuesday to keep interest rates below zero and gave no hint of when it might exit negative levels.

But as US stocks hold onto gains, investors appear to be looking through those cautionary signs — for now. Friday’s update on the Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, will likely help make the argument for or against faster and earlier cuts.

Investors are also keeping an eye on oil prices, as more companies join BP in avoiding transits through the Red Sea after attacks on shipping in the important trade route. West Texas Intermediate (CL=F) inched up to trade just below $74 a barrel while Brent crude futures (BZ=F) traded above $79 a barrel.

S&P 500 (^GSPC)

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SNP – Free Realtime Quote (USD)4,761.68+21.12(+0.45%)As of 3:11PM EST.Market open.

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  • 29 min agoFed official wants more ‘conviction’ on inflation before cutting ratesInvestors may not want to get ahead of themselves when it comes to Fed rate cut expectations for next year.Richmond Federal Reserve President Tom Barkin told Yahoo Finance Live that while the central bank has made progress on bringing down inflation, but he needs to see more consistency in the data before rate cuts can begin.”If you’re going to assume that inflation comes down nicely, then of course, we’d respond appropriately …[But,] I’ve got a perspective that inflation is a little stubborner than I think the average person is in there and I hope I’m wrong on that,” Barkin said in an exclusive interview with Yahoo Finance’s Jennifer Schonberger.Barkin — who will be a voting member of the Fed’s interest rate setting committee next year — is the latest central bank official to offer caution amid market optimism that rates will move lower in 2024. Stocks have rallied on what investors perceived to be a dovish pivot from the Fed last week.
  • Today at 12:44 PM CSTMyles UdlandThe uneven distribution of student loan debtThe burden of student loan debt is not shared equally across borrowers.In its year-end chartbook, economists at Wells Fargo outlined just how unevenly this debt is spread across borrowers, with 75% of those who have student loans owing $40,000 or less.When the moratorium on student loan payments lifted back in September, some companies warned the resumption of these payments could weigh on sales in the coming quarters. And data from the Census Bureau indicated to some economists there were initial signs these payments were weighing on household budgets.But consumer spending has remained solid through the fall months and the biggest burdens are concentrated among a small percentage of borrowers.
  • Affirm keeps squeezing shortsShares of Affirm (AFRM) were up as much as 13% on Tuesday morning after news the company’s buy now, pay later features would be integrated into self-checkout lines at Walmart (WMT).Shoppers can already use Affirm to spread out payments for goods purchased on walmart.com, at the company’s auto centers, its vision centers, and in regular checkout lines with a cashier.In other words, this is an incremental product update on a solution already offered to the vast majority of Walmart shoppers. If Affirm’s partnership with the retailer is driving any business outcomes — more sales, more customers, etc. — those outcomes are already being driven.But that this update is pushing the stock higher shows just how challenging this market has become for many investors stuck with 2022-era positions still on. Data from FinViz shows that around 21% of Affirm’s float is being sold short, meaning short sellers have piled up bets the stock will fall. For context, most companies have 1% or less of their float sold short.When short sellers end up wrong-footed as the market moves against them, they can often be squeezed out of these positions even if their fundamental views haven’t materially changed.Affirm stock fell more than 90% from its late 2021 highs to its lows earlier this year. Traders saw the name as one likely to bear the brunt of impacts from higher rates and fears of a consumer slowdown. And the stock fell commensurately.But times have changed both in the markets and the economy.There are signs that for BNPL plays like Affirm conditions have improved. Utilization of these offerings was up 40% over last year on Cyber Monday, according to Adobe Analytics.And the stock’s move in the last few months — Affirm shares have gained 180% since Nov. 1 and shares are up nearly 500% this year — shows clear signs of traders getting pushed out of bearish positions.When product updates are pushing a company’s stock around by double-digit percentage points and shares are heavily shorted, it is likely these moves are less about a material upgrade in the market’s view of the terminal value of the business’s discounted future flows and more about positioning in a market rapidly changing direction.Because while Affirm is neither a member of Magnificent Seven nor the remaining 493 stocks in the S&P 500, these shifts have knock-on effects across sectors, styles, and sizes.
  • Today at 8:31 AM CSTAlexandra CanalStocks open higher, led by NasdaqUS stocks opened higher on Tuesday as markets eye an eighth straight week of gains.The Dow Jones Industrial Average (^DJI) inched up roughly 0.1% followed by the benchmark S&P 500 (^GSPC), which climbed about 0.2%. The tech-heavy Nasdaq Composite (^IXIC) led the early morning session, jumping around 0.3%.Oil prices also edged higher as more companies joined BP in avoiding transits through the Red Sea after attacks on shipping in the important trade route. West Texas Intermediate (CL=F) climbed just below $73 a barrel while Brent crude futures (BZ=F) traded above $78 a barrel.
  • Today at 5:46 AM CSTMyles UdlandA record is a recordThe Dow Jones Industrial Average (^DJI) rose 0.86 points on Monday.That was enough for the blue-chip index to clinch a record close.Elsewhere on the superlative front, the S&P 500’s (^GSPC) close on Monday brought the index to within 60 points of a record close. For those keeping score at home, 4,796.56 is the benchmark index’s record close reached back on Jan. 3, 2022.On Tuesday, data on housing starts at 9:00 a.m. ET and earnings from FedEx (FDX) set for release after the bell are the main calendar events for US investors.
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