Stocks continue to rise as rates fall - Creand
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Stocks continue to rise as rates fall

The stock market closed out the month of November with solid gains and began the month of December on a positive note. Friday’s close marked a new 52-week high for the S&P 500, which brushed up against the 4,600 level at its high of the day.  There was likely some fear of missing out on further gains in this seasonally strong period for the market contributing to the positive action this week, but the biggest driving factors were interest rates and rethinking rate cuts in the first half of 2024.

However, the trend did change a bit during this last week.  Specifically, Mega-cap stocks were somewhat left behind. The Vanguard Mega Cap Growth ETF (MGK) was barely up (0.1%) while the S&P 500 rose 0.8%. The equal weighted S&P 500 jumped 2.5%.  Only two of the S&P 500 sectors logged a decline, communication services (-2.5%) and energy (-0.1%). The rate-sensitive real estate sector (+4.6%) saw the biggest gain, followed by materials (+2.6%), industrials (+2.1%), and financials (+2.1%).

The yield on the 2-yr US Treasury note plunged 39 basis points this week to 4.56%. The 10-yr note yield declined 24 basis points to 4.23%.  Some Fed officials pushed back on the idea that rate cuts will occur in the first half of 2024, but that did not deter investors.  In fact, the fed funds futures market now sees a much higher probability of a rate cut in May (89.0%) compared to one week ago (47.8%). 

Finally, OPEC+ countries confirmed additional voluntary cuts to the total of 2.2 million barrels per day, beginning January 1 through the end of March 2024. WTI crude oil futures declined 1.5% this week to $74.07 per barrel.