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Stocks fell slightly on Friday, but the S&P 500 ended 2023 with a surprising 24% gain as inflation slowed, the economy remained strong and the Federal Reserve signaled an end to its interest rate hike campaign. .
The S&P 500 rose for nine straight weeks, ending the year on its best winning streak since 2004. Enthusiasm for AI helped big tech stocks lift the Nasdaq Composite Index to its best year since 2020.
The composite index fell 0.28% to settle at 4,769.83, up 24.2% for the year. The S&P 500 ended 2023 just short of hitting a new all-time high. At one point Friday, it was up less than 9 points, or 0.2%, from its January 2022 closing price of 4,796.56.
On Friday, the Dow Jones Industrial Average fell 20.56 points, or 0.05%, to close at $37,689.54. It ended the year with a 13.7% increase, setting a new record for 2023. The Nasdaq Composite Index fell 0.56% during the session to 15,011.35, but rose 43.4%, its best year since 2020.
“We continue to see strong momentum going into the end of the year,” said Mona Mahajan, senior investment strategist at Edward Jones. “It was an absolutely phenomenal run.”
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The S&P 500 is about to hit a new all-time high.
The S&P 500 rose 0.3% for the week. The Dow and Nasdaq rose 0.8% and 0.1% for the week, respectively, extending their longest weekly winning streak since 2019.
After a difficult year in 2022, stock prices have rebounded this year. Much of the story this year has been how excitement around artificial intelligence has fueled huge gains in “Magnificent 7” stocks such as Nvidia and Microsoft. The enthusiasm boosted the index and accelerated the outperformance of the tech-heavy Nasdaq as average stock prices struggled amid rising interest rates.
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The Nasdaq Composite soared more than 40% in 2023.
But the 10-year Treasury yield fell from more than 5% in late October to less than 3.9% on Friday after the Fed signaled it would likely finish with a rate hike and could even cut rates multiple times next year. did. Investors ended the year with increased confidence in the possibility of a “soft landing” for the U.S. economy, avoiding recession, as interest rates fell and labor data remained strong.
As a result, the market’s rise expanded in the fourth quarter, and in December, the Dow Jones Industrial Average, which is heavy on industrial stocks, hit a new record high. The Russell 2000 of small-cap stocks rose more than 12% in December, marking its best month since November 2020. It also had its best quarter since the fourth quarter of 2020.
Nancy Tengler, CEO and CIO of Laffer Tengler Investments, said this market breadth expansion is likely to continue into the new year, but as some high-priced stocks “rebalance.” He said that a period of integration is not out of the question.
Mahajan said Wall Street is also watching as more Fed speakers weigh in on the prospects for rate cuts ahead of the January meeting, which could lead to some volatility early in the new year. Stated.
“The Fed’s risk is either to wait too long or to act too soon,” Tengler said. “If rates are cut too soon and inflation rises again, that will be bad news for everyone.”
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