U.S. stocks rise on merger deals corporate earnings

U.S. stocks rose on Monday, closing near session highs, supported by a wave of merger deals,
after largely ignoring dovish messages from Federal Reserve officials.

Topic

Details

Discussion

Conclusion

Details:

Following a seven-week rally, the S&P 500 index rose 0.6%, after news of deals worth more than $40 billion on Monday, after months of disappointing volumes.

The Nasdaq 100 index rose 0.8%, after closing at a record high on Friday. The Dow Jones Industrial Average hit an all-time high, after breaking several records last week.

The VIX volatility index, a measure of fear on Wall Street, remained around 12 points, close to its lowest levels in several years.

Morgan Stanley’s head of trading and equities, Mike Wilson, said this week will show “whether the seasonal trend of rising stock markets in the second half of December will face potential headwinds, amid one of the strongest short-term rallies in recent years.”

Whether the S&P 500 can extend its eight-week winning streak will depend on data releases, including durable goods orders, personal consumption expenditures, the Fed’s preferred measure of inflation, and the latest estimate of third-quarter GDP.

Discussion:

While stocks largely ignored Fed officials who are trying to temper expectations of early and deeper-than-expected interest rate cuts, the rise in Treasury yields took a breather on Monday.

Yields rose, with the two-year yield up about 4.5%, while the 10-year yield neared 4%. The dollar held steady, while the yen weakened.

Chicago Fed President Charles Evans and Cleveland Fed President Loretta Mester were the latest to join a growing group of central bank officials who have cooled market optimism, after New York Fed President John Williams said last week that bets on a March rate cut were premature.

On the other hand, European Central Bank board member Poschtan Vassilev struck a cautious tone after ECB President Christine Lagarde said last week that the bank had not discussed cuts at all.

Conclusion:

Traders will also be watching Japan, where the country’s central bank began a two-day policy meeting.

While speculation has grown that the Bank of Japan will soon end the world’s last negative interest rate system, economists believe April is the most likely timing for a change, with about 15% of them expecting BOJ Governor Haruhiko Kuroda to end negative rates in January, according to a Bloomberg survey of more than 50 economists.

Economists at Societe Generale led by Yao Yao wrote in a note that “the BOJ does not need to rush into policy changes.” They added that “markets will be watching for any signs of the board’s willingness to end negative rates, or to control the yield curve.”

U.S. stocks rise on merger deals corporate earnings

U.S. stocks rise on merger deals corporate earnings

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