“Rates will remain high for much of the year and price pressures are still a concern against a raft of global uncertainty,” he said. “We will keep a close watch on how confidence evolves through early 2024 as price pressures ease further and the focus on the easing phase of the rates cycle grows.”
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Overnight on Wall Street, the weakness for tech also pulled the Nasdaq composite down by 0.3 per cent. The Dow Jones rose by 0.3 per cent to set its latest record, while the S&P 500 softened by 0.09 per cent.
Bitcoin jumped to $US50,000 for the first time in more than two years, staging a remarkable comeback from a series of crypto industry scandals and bankruptcies that had raised questions about the viability of digital assets.
The original cryptocurrency has tripled in value since the start of last year, climbing back from a 64 per cent plunge in 2022. Bitcoin last traded at $US50,000 in December 2021. The price is still below the all-time high of almost $US69,000 reached in November 2021.
Conditions were calm across markets, and yields were also stable in the bond market. The next big event for global investors could be this week’s US update on inflation, which economists expect to show a drop back below the 3 per cent level.
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In the meantime, Diamondback Energy climbed 9.4 per cent after it said it would buy Endeavor Energy Resources in a deal valued at roughly $US26 billion, including Endeavor’s debt. Diamondback is using both cash and stock to pay for the purchase of the privately held exploration and production company.
Big companies in the S&P 500 have mostly been reporting better results than expected for the final three months of 2023. More than two-thirds of the companies in the index have already reported their results, but several big names are still to come this upcoming week. They include Coca-Cola on Tuesday, Kraft Heinz on Wednesday and Southern Co. on Thursday.
The smallest companies in the market, meanwhile, are still in the relatively early days of their profit reporting season. But they’ve been beating analysts’ expectations by even more than their big rivals, according to Bank of America strategists.
Bitcoin hit $US50,000 for the first time since 2021. Credit: Getty
Worries have grown about how top-heavy the stock market has become, where the seven biggest companies have accounted for a disproportionate amount of the S&P 500’s rally to a record. If more companies aside from the group known as the “Magnificent Seven” can deliver strong profit growth, it could soften the criticism that the market has become too expensive.
Another worry for the market has been uncertainty about just how much danger lurks for the economy in the loans and other holdings banks have on their balance sheets that are tied to commercial real estate.
The widespread expectation, even among top U.S. government officials, is that weakness for office buildings and other commercial projects will mean at least some pain for banks. But no one can say how much for sure.
That’s why so much focus has been on New York Community Bancorp recently. It shocked investors two weeks ago when it announced a surprise loss for its latest quarter. Some of the pain was due to its acquisition of Signature Bank during the industry’s mini-crisis last year. But worries about commercial real estate also played a role.
New York Community Bancorp’s stock has roughly halved since that surprise report, but it held a bit steadier on Monday. It edged down by 0.2 per cent.
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An index measuring stock prices across the regional banking industry rose 1.8 per cent.
In the bond market, yields were moving very little. The yield on the 10-year Treasury slipped to 4.16 per cent from 4.18 per cent, late on Friday.
The two-year Treasury yield, which more closely tracks expectations for the Federal Reserve, held at 4.48 per cent, where it was late Friday.
Inflation has been cooling enough that the Federal Reserve has hinted it may cut its main interest rate several times this year. Such cuts typically juice financial markets and the economy, and they would release pressure that’s built up since the Fed has taken its main interest rate to the highest level since 2001.
After earlier hoping cuts to rates could begin as soon as March, traders have since pushed their forecasts out to May or June. Reports showing the US economy and job market remain remarkably solid, along with some comments from Fed officials, have been forcing the delays.
If the Fed ends up making traders wait even longer than expected for rate cuts, it could upset stock prices that have already shot upward on the assumption of lots of good news, according to Marc Dizard, chief investment strategist at PNC Asset Management Group. Besides lower interest rates, that also includes stronger convictions for no recession for the US economy, inflation continuing to come down and corporate profits growing more strongly.
“There isn’t a whole lot more than can really go right,” he said.
In stock markets abroad, indexes were modestly higher in much of Europe. In Asia, several markets were closed for holidays.