A trader works, as a screen displays a news conference by Federal Reserve Board Chairman Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 13, 2023.
Brendan Mcdermid | Reuters
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The bottom line
U.S. markets extended their rally spurred by a dovish Fed.
The Dow Jones Industrial Average added 0.43%, setting another record high after it broke the 37,000 level for the first time Wednesday. The S&P 500 gained 0.26% and the Nasdaq Composite rose 0.19%.
The pace of the rally cooled on Thursday as Big Tech, which has a disproportionately large impact on the indexes, saw losses. Microsoft fell 2.25%, Amazon lost 0.95% and Meta dipped 0.47%.
Deutsche Bank chief U.S. equity and global strategist Bankim Chadha thinks market growth next year could be more pronounced outside of Big Tech. “We are looking for the rally to broaden so I would look elsewhere for now,” Chadha said.
Big Tech’s losses Thursday, however, were more than offset by gains in other sectors.
Bank stocks — which tend to benefit from looser monetary policy as more liquidity flows through the system — had a good day. Western Alliance Bancorp shot up 9.35%, Charles Schwab jumped 7% and Citizens Financial Group popped 6.63%, helping the SPDR S&P Regional Banking ETF gain 4.83%.
And they might continue doing better than the general U.S. stock market in 2024, according to RBC Capital analysts.
“In the second half of 2024, we see continued improvement in the fundamentals as the Federal Reserve gradually lowers the Federal Funds rate, loan growth starts to accelerate, loan loss provisions begin to fall and capital return through share repurchases begins to accelerate,” RBC said.
So the rally could broaden next year, as more sectors benefit from the Fed’s gradual interest rate cuts.
Furthermore, if November’s much-better-than-expected retail sales are anything to go by, consumer spending, which makes up almost 70% of U.S. gross domestic product, will hold steady or even increase, boosting hopes of a soft landing.