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NEW YORK (AP) – The S&P 500 ended 2023 up more than 24%, and the Dow Jones Industrial Average ended near its all-time high. Easing inflation, economic resilience and prospects for lower interest rates boosted investorsEspecially in the last two months of this year.
The stock closed with a modest loss on Friday.
The S&P 500 fell 13.52 points, or 0.3%, to 4,769.83. The benchmark index remains up for an unprecedented nine consecutive weeks and is just 0.6% shy of its all-time high set in January 2022.
The Dow Jones Industrial Average fell 20.56 points, or 0.1%, to $37,689.54 after setting a record on Thursday.
The Nasdaq fell 83.78 points, or 0.6%, to 15,011.35, but that was barely a blemish considering it was up more than 43% for the year, its best performance since 2020.
For most of this year, the market’s gains were primarily driven by seven stocks: Apple, Microsoft, Alphabet, Amazon, NVIDIA, Metaplatforms, and Tesla. These stocks, known as the Magnificent 7, accounted for about two-thirds of the gains in the S&P 500 index this year, according to S&P Dow Jones Indices. Nvidia led the group with a gain of about 239%, boosted by the excitement surrounding artificial intelligence.
Quincy Crosby, chief global strategist at LPL Financial, said the strong rally in November and December signaled a major psychological shift for investors because it went beyond big technology companies. The Russell 2000 index of small companies rose more than 20% in two months, ending 2023 up 15.1% after falling 21.6% in 2022.
“Broader participation in the market reinforced and confirmed the rally in small and medium-sized company stocks, with particular emphasis,” Crosby said.
U.S. investors entered 2022 with the scars of massive losses in both stocks and bonds. They expected inflation to ease further as the Federal Reserve raised interest rates. The trade-off would be a weak economy, perhaps a recession. However, the economy is doing well thanks to a strong economy, although inflation has fallen to around 3%. consumption expenditure and healthy job market.
Stock markets are now betting that the Fed can achieve a “soft landing” in which the economy slows enough to quell high inflation but not enough to tip it into recession. As a result, investors are now expecting the Fed to begin cutting interest rates as early as March.
The Fed has indicated it will cut its benchmark interest rate three times by a quarter of a percentage point next year. This interest rate currently hovers between 5.25% and 5.50%, the highest level in 20 years.
Lower interest rates could further fuel overall market momentum in 2024. Wall Street expects stronger corporate profit growth next year after a largely lackluster 2023 as companies struggled with rising input costs, labor costs and changes in consumer spending.
Investors in the bond market appeared headed for a third straight year of losses until conditions improved in late October. Excitement over the possibility of a rate cut sent bond prices soaring and yields falling. The 10-year Treasury yield, which hit 5% in October, stood at 3.88% on Friday, up from 3.85% on Thursday.
The two-year Treasury yield, which more accurately reflects expectations for the Fed, fell to 4.25% from 4.28% since late Thursday. It also exceeded 5% in October.
Many global markets have also seen solid gains this year. The French and German indexes rose by double digits, while the British index rose just under 4%.
Tokyo’s Nikkei Stock Average is expected to hit 27 in 2023 as Japan’s central bank inclines towards ending years of ultra-easy monetary policy as inflation finally exceeds its target of around 2%. %, making it the best year in 10 years.
The Shanghai Composite Index has fallen about 3% since the beginning of the year, while Hong Kong’s Hang Seng Index has fallen nearly 14%. Weak global demand for the real estate sector and China’s exports, as well as high debt levels and shaky consumer confidence, are weighing on the country’s economy and stock market.
US and international crude oil prices were relatively stable on Friday. Oil prices have fallen more than 10% this year, contrary to some experts’ predictions that they could exceed $100 a barrel.
Benchmark U.S. crude oil has fallen nearly 11% in 2023 and a whopping 21% in the last three months of the year, despite OPEC production cuts involving energy exporter Russia and another war in the Middle East.
Production increases in the United States, currently the world’s top oil producer, as well as Canada, Brazil and Guyana, offset OPEC’s production cuts. Energy analysts say not all OPEC members have joined in the production cut, with some countries like Iran and Venezuela increasing their oil injections.
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Charles Sheehan contributed to this report.
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