The Wall Street made substantial gains on Monday after the losses last week that had seen the Dow Jones, S&P and Nasdaq going down by 2.77 percent, 3.37 percent and 3.99 percent respectively.
However, the trading on Monday meant the Dow Jones Industrial Average clawed back some of the steep losses from the previous week, as traders looked ahead to a highly anticipated Federal Reserve meeting and new inflation data.
It added 528.58 points or 1.58 percent to 34,005.04. That was its first close over 34,000 since Dec 2. The S&P 500 gained 1.43 percent to close at 3,990.56, and the Nasdaq Composite rose 1.26 percent to 11,143.74.
A lift in Boeing shares pushed the Dow higher following reports that the airline is close to a deal with Air India. Elsewhere, energy stocks rose as oil prices steadied, following several weeks of declines.
But much of the boost to Wall Street’s main indexes came from a 2.1 percent increase the rise in share value of Microsoft, following the software maker’s plans to buy a 4 percent stake in the London Stock Exchange Group.
A slew of deal-making activity boosted sentiment. Coupa Software and Horizon Therapeutics were among biggest movers on Monday after the companies announced they’ve agreed to be bought. Shares of Coupa gained 26 percent, while Horizon added 15 percent.
Meanwhile, a New York Fed survey showed consumers had grown more optimistic about inflation in November. The bank’s survey of Consumer Expectations showed they expected one-year inflation to run at a 5.2 percent pace, down 0.7 percentage point from October.
On Tuesday, the November consumer price index will be released and traders will be looking for a sign that inflation is slowing. The same day, the Federal Reserve will begin its two-day meeting and is expected to announce another rate hike on Wednesday, though traders anticipate a smaller move than in recent months.
“The market is certain that we’re going to get half a point hike, but I think it (economic data) does change the prospect of what might happen further down the road.” Treasury Secretary Janet Yellen on Sunday forecast a substantial reduction in US price pressure in 2023, while also acknowledging a risk of a recession.
In addition to the expected rate hike, the Fed’s updated economic projections and Chair Jerome Powell’s press conference could be key signals for what the central bank wants to do in the coming months.
“Financial conditions have eased dramatically since the October CPI reading released last month, so the Fed will likely use the December FOMC meeting to walk those back,” said Cliff Hodge, chief investment officer for Cornerstone Wealth.
“We think the markets are too sanguine on rates after the first quarter and we expect Powell to take a more hawkish tone and for the dots to indicate higher rates for a longer period of time than what is currently being priced in by the futures markets.”