Strong US Data – US Market Wrap

– Due to expectations that the US economy will continue to be relatively robust and that inflation will start to decline, Wall Street traders drove equities to yet another record high.
– With the US GDP data beating recession forecasts and supporting corporate America’s outlook, equities recorded their sixth straight day of gains. Although this strength suggests policymakers will not be in a rush to cut rates, many took heart from a closely watched measure of underlying inflation falling in line with the Fed’s 2% target.
– The S&P 500 ended the day close to 4,900. International Business Machines surged on a bullish outlook. Tesla Inc. fell 12% as Elon Musk’s attempt to persuade investors to overlook slower sales growth failed. The backlash against Boeing intensified as the head of American Airlines Group criticised the aircraft manufacturer for a string of quality lapses.
– Swap contracts continued to fully price in a Fed reduction in May, raising the expected total cuts this year to about 140 basis points. The US 10-year yield dropped five basis points to 4.12%. The euro fell as markets interpreted President Christine Lagarde’s subdued affirmation that the European Central Bank may begin lowering rates from around mid-2024 as a sign that earlier moves are very much in play.
– The US economy grew faster than expected in the fourth quarter, finishing an unexpectedly robust year as consumer spending was boosted by decreasing prices. GDP increased at an annualised pace of 3.3%, while a closely watched gauge of underlying inflation increased by 2% for the second consecutive quarter.