The U.S. Stock Market Approaches Its Highs in 2023 as Consumers' Outlook on the Economy Improves

U.S. equities made gains on Friday, with the S&P 500 briefly approaching its highest level of the year after a positive consumer-sentiment survey indicated an improving economic outlook.

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Key Market Movements:

• The Dow Jones Industrial Average (DJIA) rose by 50 points or 0.1% to 36,166.
• The S&P 500 (SPX) increased by 4 points or 0.1% to 4,590.
• The Nasdaq Composite (COMP) saw a slight gain of 3 points or less than 0.1% to 14,344.

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On Thursday, the Dow Jones Industrial Average climbed by 63 points or 0.17% to 36,117, the S&P 500 gained 36 points or 0.8% to 4,586, and the Nasdaq Composite saw a substantial increase of 193 points or 1.37% to 14,340.

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Goldman Sachs noted that the S&P 500 has been experiencing its tightest trading range in the past two years over the last couple of weeks.

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Market Drivers:U.S. stocks rebounded from initial losses, with the S&P 500 coming within one point of its intraday high for 2023 set on July 27. The positive momentum was triggered by the release of the University of Michigan consumer-sentiment gauge, which rose to 69.4 in December from the prior month's six-month low of 61.3. This marked the first increase in five months.

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Earlier, the November jobs report surpassed expectations, revealing the creation of 199,000 jobs and a decline in the unemployment rate to 3.7%, down from 3.9% in October. Auto workers restarting hiring after major national strikes contributed to the positive employment data.

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Initially, stock futures fell, and bond yields rose in response to the data, as investors speculated it could impact expectations for multiple Federal Reserve rate cuts in 2024. However, the early decline in stocks was short-lived, and Treasury yields remained elevated.

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Despite a retreat earlier in the week, the S&P 500, close to a 20-month high, displayed newfound optimism among investors. The anticipation of aggressive interest rate cuts by the Fed in the coming year had driven both stocks and bonds higher in recent weeks, following a three-month-long losing streak in October.

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Effy Elfenbein, the portfolio manager of the AdvisorShares Focused Equity ETF and a blogger at Crossing Wall Street, attributed the positive market sentiment to the widespread belief that the Fed has completed its policy adjustments.

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Following the jobs report, Treasury yields saw an upward spike, partially reversing the trend observed over the past month. The yield on the 10-year Treasury note increased by 6 basis points to 4.209%. Bond yields move inversely to prices, rising as prices fall, and vice versa.

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Looking ahead, the coming week is expected to be crucial, with significant events including key inflation data, Treasury auctions, and a Federal Reserve interest-rate decision on the agenda.