Stocks rise as dollar falls, gold rallies on Fed commentary

Trading on the indexes was choppy with the Dow up nearly 200 points by noon but closing with gains all around, the Dow up 83.  Encouraging comments from Fed Governor Waller encouraged the sentiment that rate hikes were done and even bolstered optimism that the first cuts could come as early as March. Then Fed Governor Bowman threw cold water on Waller’s comments by reaffirming that more hikes would probably be necessary to get inflation to the Fed’s goal, thus the choppiness bringing the market down. 

However, Waller’s seemed to prevail as “the first sign the Fed recognizes they might be able to cut rates next year” and that “for the rest of the year, momentum is biased to the upside.”  PCE, the Fed’s preferred measure of inflation, is coming later this week and consumer confidence rose after three months of declines. Volume came in at 10.2 billion. 

Stocks rise as dollar falls, gold rallies on Fed commentary

By Sinéad Carew and Amanda Cooper

Tue November 28, 2023  4:52 PM

DJ: 35,333.47  -56.68         NAS: 14,241.02  -9.83          S&P: 4,550.43  -8.91        11/27

DJ: 35,416.98  +83.51        NAS: 14,281.76  +40.73       S&P: 4,554.89  +4.46       11/28

NEW YORK/LONDON, Nov 28 (Reuters) - MSCI's global stock index advanced on Tuesday while the dollar fell as a Federal Reserve official signaled that the U.S. central bank was done raising rates and could even consider rate cuts if inflation keeps easing.  The U.S. dollar index hit a 3-1/2 month low and was on track for its biggest monthly drop in a year as investors took the view that growth in the world's largest economy is starting to slow down, with the market starting to price in a rate cut by the first half of the year.  Fed Governor Christopher Waller bolstered these bets by flagging the possibility of lowering the Fed policy rate in the months ahead if inflation continues to come down. Waller also said he was "increasingly confident" the current interest rate setting would prove adequate to lower inflation to the Fed's 2% target.  Another Fed governor, Michelle Bowman, said the central bank will likely need to raise borrowing costs further in order to bring inflation back down to its target.

Traders appeared to take their cues from Waller with increased bets for the first rate cut taking place as soon as March with the probability for a 25 basis-point cut last at nearly 33%, up from 21.5% on Monday, according to the latest data from CME Group's Fedwatch tool. The majority expected a cut of at least one notch in May, according to CME data.  The market saw Waller's comments as the first sign the Fed "recognizes they might be able to cut rates next year" while other officials "took some of the euphoria" away, according to Anthony Saglimbene, Ameriprise chief market strategist.  And Saglimbene said, "It's normal you'll see stocks consolidate in the last few days of a really strong month. ... For the rest of the year, momentum is biased to the upside." 

While trading in stocks was choppy, Wall Street indexes managed to close higher. The Dow Jones Industrial Average (.DJI) rose 83.51 points, or 0.24%, to 35,416.98, the S&P 500 (.SPX) gained 4.46 points, or 0.10%, to 4,554.89 and the Nasdaq Composite (.IXIC) added 40.73 points, or 0.29%, to 14,281.76.  MSCI's gauge of stocks across the globe (.MIWD00000PUS) gained 0.27%.

Also on Tuesday, a survey showed U.S. consumer confidence rose in November after three months of declines, though households still anticipated a recession over the next year.  Later this week the spotlight will be on the U.S. October personal consumption expenditures report (PCE), which includes core PCE, which is the Fed's preferred measure of inflation. Also euro zone consumer inflation figures should give further clarity on where prices and monetary policy are headed there. 

After the Fed commentary, U.S. Treasury yields dipped with benchmark 10-year notes down 6 basis points to 4.328%, from 4.388% late on Monday. 

Per the CBOE, volume came in at 10.2 billion.