Dow Jones trims gain, stocks struggle for direction in afternoon trade


U.S. stocks were giving back some of Wednesday’s earlier gains after the release of the Federal Reserve’s beige book pointed to easing of labor conditions and weaker economic activity.

Treasury yields were lower on hopes for Federal Reserve rate cuts next year.

How are stock indexes trading

  • The Dow Jones Industrial Average
    climbed 67 points, or 0.2%, to 35,484, after hitting a session high of 35,579.13.

  • The S&P 500
    rose 3 points, or 0.1% near 4,559.

  • The Nasdaq Composite
    advanced 6 points, or less than 0.1%, to 14,285.

The Dow was on pace for a 7.4% monthly gain, the best since October 2022. The S&P 500’s 8.7% advance in November and 11.1% climb for the Nasdaq Composite would be their best monthly gains since July 2022, per Dow Jones Market Data.

What’s driving markets

Stocks trimmed earlier gains on Wednesday after the Fed’s beige book survey of its districts showed mostly weaker economic activity and easing demand for labor.

The main equity gauges still were on pace for their best monthly gains since at least October 2022, as benchmark borrowing rates for the economy pulled back.

The yield on the 10-year Treasury,
which in October hit a 16-year peak just above 5%, slid to 4.28% in Wednesday trading as investors boosted bets that easing inflation will encourage the Fed to stop raising policy rates and even trim rates within several months.

“Momentum begets momentum,” said Sonu Varghese, global macro strategist at Carson Group, of the strong November rally. “The catalyst really was lower-than-expected inflation earlier this month, which changed the narrative from higher rates for longer to potential rate cuts.”

The odds of the central bank cutting rates in March 2024 by 25 basis points was priced at 46.2% Wednesday, up from just 21% in the previous session. The chance of at least a 25-basis-point rate cut by May was seen at about 76%, according to the CME FedWatch tool.

The shift follows comments on Tuesday from Fed Governor Chris Waller, who suggested current monetary policy is well-positioned to slow the economy and cool the inflation.

Atlanta Fed President Raphael Bostic said Wednesday that he is more confident in his forecast of a soft landing for the economy and the inflation keeps falling back to 2%. Chair Jerome Powell is due to give a speech at 11 a.m. Eastern Friday.

In U.S. data, the economy grew at a 5.2% seasonally adjusted annual rate in the third quarter, the Bureau of Economic Analysis said on Wednesday. The reading came in above expectations of 5% and above the previous estimate of 4.9%.

“We’ve been in the camp of no recession,” Varghese at Carson Group said. “We are taking that forward into next year, because the consumer is strong, employment is strong.”

Households boosted spending at a 3.6% pace in the third quarter, down from an original 4%, while the price index for personal-consumption expenditures (PCE) was revised down to a 2.8% annualized increase from 2.9% in the prior release, economists said.

“When people are working, people can spend,” Jamie Cox, managing partner for Harris Financial Group, told MarketWatch.

Cox expects higher interest rates to eventually weaken consumption and lead to rate cuts next year, but sees healthy signs in economic growth against a backdrop where rates no longer are being kept at ultralow levels.

“If you still get GPD growth and rates are way above 3%, then that’s good,” Cox said.

The U.S. trade deficit in goods also widened to $89.8 billion in October, the Commerce Department said Wednesday. An advanced estimate of wholesale inventories, meanwhile, showed a 0.2% drop in October.

Key inflation data, in the shape of the PCE index for October, will be published Thursday at 8:30 a.m. Eastern.

Declining U.S. Treasury yields have been pressuring the dollar lower in November, with the dollar index
was down 3.6% on the month so far, helping to boost the price of gold
which is above the $2,000 an ounce mark.

See: Gold rallies toward ‘golden cross’ after defying bearish signal

But the backdrop of economic growth, a strong labor market and easing inflation also has kept alive the debate about whether the U.S. can achieve a soft landing.

JPMorgan Chase & Co.

Chief Executive Jamie Dimon said Wednesday he’s less certain than others that a U.S. recession can be avoided.

See: Bill Ackman warns economy will fall off a cliff if the Fed doesn’t hurry and cut rates

Companies in focus

—Jamie Chisholm contributed reporting to this article.

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