The Dow Jones Trades Near Its Highest Level in Two Months Amid Optimism That Rate Hikes by the Fed May Be Over

U.S. stocks saw a slight increase on Monday, kicking off a shortened holiday week, as investors continued to be optimistic about the Federal Reserve's decision to halt interest rate hikes.

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In the market movement, the Dow Jones Industrial Average (DJIA) climbed 62 points, or 0.2%, reaching 35,010. The S&P 500 (SPX) experienced an 11-point gain, or 0.2%, closing at 4,525. Meanwhile, the Nasdaq Composite (COMP) rose by 70 points, or 0.5%, reaching 14,196. The positive trend follows last Friday's higher close, marking the third consecutive week of gains for the Dow, S&P 500, and Nasdaq Composite. Over the past three weeks, the S&P 500 recorded its most significant percentage increase since June 2020, surging by 9.6%, according to Dow Jones Market Data.

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The week began cautiously as the markets took a breather after recent robust gains. U.S. markets will be closed on Thursday for Thanksgiving Day, with stock and bond markets closing early on Friday.

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Last week's stock surge was influenced by a lower-than-expected inflation reading, leading investors to speculate that the Federal Reserve has concluded its rate hikes. Chris Larkin, Managing Director for Trading and Investing at E-Trade from Morgan Stanley, noted that the focus has shifted to when the Fed might pivot to interest rate cuts amid a cooling economy.

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The November rally coincides with a decline in borrowing costs, as the yield on 10-year Treasurys dropped below 4.5%, down from over 5% just last month. This decline in yields, fueled by hopes of a slowing economy and easing inflation, has led to expectations that the Federal Reserve could start cutting interest rates by mid-next year.

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Richard Hunter, Head of Markets at Interactive Investor, stated that markets are benefiting from the prospect of easing monetary conditions. The latest inflation data has further fueled hopes that the Federal Reserve is steering towards a soft landing for the economy, with widespread belief that the interest rate hiking cycle has concluded.

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Looking ahead to the week, Hunter highlighted that economic releases are minimal due to the Thanksgiving holiday, but attention will be on Black Friday for insights into consumer demand as the holiday season kicks off.

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The week's earnings highlight is anticipated to come from Nvidia Corp., an artificial-intelligence chip maker, reporting after Tuesday's closing. Among the prominent tech stocks, Microsoft Corp. revealed plans to hire Sam Altman to lead a new advanced-AI research team. However, negotiations over the weekend aimed at reinstating Altman as CEO of OpenAI, the parent company of ChatGPT and a major Microsoft investor, proved unsuccessful.

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The Conference Board reported a 0.8% decline in its leading economic index for October, marking the 19th consecutive monthly decrease. Despite this, the U.S. economy does not seem to be nearing a recession.

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Tom Barkin, President of the Richmond Fed, is scheduled to appear on Fox Business at noon. Tom Lee, Head of Research at Fundstrat, expressed a positive bias for markets this week, citing favorable seasonals, growing confidence in falling inflation, and general investor skepticism. He also noted that institutional investors being away during holiday weeks could amplify market moves.

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