US stocks rise amid interest rate cut prospects

Today’s headlines

What’s happening: US stocks closed higher on Friday and recorded gains for the week.

What happened: Investors responded to several economic reports from the US, which were delayed due to the 43-day government shutdown.

Data on PCE inflation and Michigan consumer sentiment reinforced speculations of the Federal Reserve cutting interest rates by 25 basis points (bps) this week.

Why it matters: Data from the Commerce Department released on Friday showed that consumer spending surged 0.3% in September, in-line with market expectations, following a 0.5% rise in the previous month.

The Personal Consumption Expenditures Price Index rose 0.3% in September, after a 0.3% gain in August. The PCE price index jumped 2.8% in the 12 months through September, following a 2.7% gain in August, in-line with market estimates.

Another report from the University of Michigan showed consumer sentiment rose to 53.3 in December, higher than market expectations of 52.

Markets widely expect the Fed to cut interest rates by 25 bps at its meeting this week.

Communication services was the best performing sector on the S&P, rising almost 1% to reach a record closing high. Utilities and energy stocks were the worst performing sectors on Friday.

Shares of Warner Bros Discovery jumped more than 6% on Friday after Netflix agreed to buy the company’s TV, film studios, and streaming segment for $72 billion.

Ulta Beauty’s stock jumped almost 13% after the beauty retailer reported better-than-expected results for the third quarter and raised its full-year outlook. Shares of Cooper Companies also rallied around 6% after the company posted upbeat fourth-quarter financial results and issued strong full-year guidance.

The Dow Jones index gained 104.05 points, or 0.22%, to close at 47,954.99 on Friday, while the S&P 500 added 0.19% to 6,870.40. The Nasdaq 100 rose 0.43% to settle at 25,692.05.

For the week, the S&P 500 rose 0.31%, while the Dow surged 0.5%, with all three major indices recording gains for the second straight week.

What to watch: The Fed will announce its interest rate decision on Wednesday.

Data on consumer inflation expectations (2000 UAE Time) will be released today. Median inflation expectations in the US, which declined to 3.2% for the one-year horizon in October from 3.4% in the previous month, are expected to ease further to 3.1% in November.

The markets today

The Canadian dollar in focus today ahead of Bank of Canada’s policy decision

Context: The CAD/USD forex pair slipped this morning, after jumping to two-month high on Friday following domestic labour data.

Details: Data released on Friday showed that Canada’s employment jumped by 54,000 in November, after a 66,600 gain in the previous month. The figure came in much better than market expectations of a 5,000 decline.

The unemployment rate declined to 6.5% in November from 6.9% in October, reaching the lowest level in 16 months. The figure was better than market estimates of 7%. The recent reading signalled a reversal in the trend of surging unemployment rates through most of the year.

A decline in the price of crude oil, one of Canada’s major exports, exerted pressure on the loonie. WTI crude oil prices edged lower to trade at $60.07 per barrel this morning.

Weakness in the US dollar lent some support to the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 98.90 this morning.

The CAD/USD pair fell around 0.1% to 1.3824 this morning, after hitting two-month highs on Friday.

What to watch: With no major economic data due today, investors await the interest-rate decision from Bank of Canada on Wednesday. The Bank of Canada, which cut its benchmark overnight rate by 25bps to 2.25% at its October meeting, is expected to keep rates unchanged at its upcoming meeting.

Other Markets: European indices closed mostly lower on Friday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index down by 0.45%, 0.09% and 0.01%, respectively, and the DAX 40 up by 0.61%.

The news shaping the markets

Russia’s Ministry of Defence said that its forces had seized the villages of Kucherivka in the Kharkiv region and Rivne in the Donetsk region in Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.

Japan’s current account surplus widened to ¥2,833.5 billion in October from ¥2,453.8 billion in the year-ago month, lending support to the JPY/USD forex pair.

Indonesia’s motorbike sales rose 2.1% year-over-year to 523,591 units in November. This representing an easing from the previous month’s 8.4% growth sent the IDR/USD pair lower in forex trading this morning.

China’s foreign exchange reserves rose to $3.346 trillion in November, from $3.343 trillion in the previous month. The latest reading coming in below market estimates of $3.36 trillion exerted pressure on the CNY/USD forex pair.

Colombia’s annual inflation rate slowed to 5.30% in November from 5.51% in October and came in below market expectations of 5.45%. However, the reading remaining above the central bank’s target of 3% sent the COP/USD pair lower in forex trading this morning.

What else to watch today

Singapore’s foreign exchange reserves (1300 UAE Time), South Africa’s 182-day T-Bill auction (1330 UAE Time), 273-day T-Bill auction (1330 UAE Time), 364-day T-Bill auction (1330 UAE Time) and 91-day T-Bill auction (1330 UAE Time), Germany’s 12-month Bubill auction (1430 UAE Time), Mexico’s auto exports (1600 UAE Time) and auto production (1600 UAE Time), France’s 12-month BTF auction (1800 UAE Time), 3-month BTF auction (1800 UAE Time) and 6-month BTF auction (1800 UAE Time), as well as US 3-month Bill auction (2030 UAE Time), 6-month Bill auction (2030 UAE Time) and 3-year Note auction (2200 UAE Time).