Standard U.S. stock indexes posted strong gains for a seventh straight week (ending Dec. 15), supported by market expectations of an end to the U.S. currency tightening cycle and falling U.S. Treasuries.
The most important factors that influenced the weekly performance of US stocks
A strong recovery in risk appetite across global equity markets contributed to US stock gains this week, as the (VIX) Volatility Performance Index fell around 0.75% this week, reflecting a decline in investor fears and a recovery in risk appetite movements. US stock market.
The strong rise in risk appetite was driven by recent federal developments that fueled market confidence about the end of the cycle of raising interest rates, in addition to a sharp decline in yields. In the following lines, let us clarify how these factors contributed. To boost upward momentum in the performance of US stocks this week:
First: The results of the US Federal Reserve meeting
At its last meeting this year, the US Federal Reserve decided to keep interest rates unchanged at 5.50% for the fourth consecutive meeting. The central bank also cut inflation expectations to 2.8%, 2.4% in 2023, 2024 and 2025. % and 2.1% respectively. The central bank’s previous expectations indicated that inflation would stabilize at 3.3%, 2.5% and 2.2% over the same period.
The US Federal Reserve lowered its expectations for interest rates to 4.6% and 3.6% in 2024 and 2025, respectively, in addition to less dovish statements from the US Federal Reserve governor, which included the possibility of interest rate hikes. The rate hike cycle is reaching its end.
Accordingly, these important developments helped increase the likelihood of US interest rates reaching peak levels and starting to think about lowering interest rates early next year, and this cast a positive shadow on the weekly performance of US stocks.
Second: A decline in US Treasury yields
U.S. Treasuries experienced strong weekly losses. For example, the 10-year U.S. Treasury bond yield fell about 7% this week, which reflected positively on U.S. stock performance due to the inverse relationship between the two sides.
Third: Global stock markets’ sentiment regarding US economic conditions
U.S. industrial production rebounded in December on the back of an increase in orders and increased demand for workers, a survey results suggest, leading to less fears. A slowdown in US economic growth in the fourth quarter of the year, in turn, led to a recovery in US stock markets this week.
Weekly performance of US stock indices in light of these developments
As a result of the above positive factors, the gains of the S&P 500 index were estimated at around 2.49%, which means the index rose by 114.82 points, thereby recording the longest streak of weekly gains since September 2017.
Also, the 100 index posted a strong weekly gain of 3.35% or about 583 points to record the longest streak of weekly gains since July 2021, while the industrial index gained 1,057.29 points to reach 2.92%. A series of weekly profits since the beginning of 2019.
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