Dow Jones on track for record close as stocks nudge mostly higher

What’s driving markets

A steady rally into the year end has further propelled the benchmark S&P 500 toward an all-time high. The Wall Street equity benchmark is striving for a ninth consecutive week of gains, which would be its best such winning streak since 2004, having jumped 24.4% so far in 2023.

See: The 10 days that moved the stock market the most in 2023

Investors have piled into stocks primarily on hopes that with inflation falling back near the Federal Reserve’s 2% target, the central bank will start reducing borrowing costs by the spring of 2024, and all while the U.S. economy avoids a recession.

But that’s also prompted concerns that market participants have gotten ahead of themselves.

“The stock market is too optimistic about the quantity of rate cuts expected in 2024 and we may be borrowing some of 2024’s gains now as the year-end rally continues because we don’t expect to see as many rate cuts as the market is currently predicting,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, a Punta Gorda, Florida-based firm with $1 billion in assets under management.

“We expect to see three rate cuts in 2024 starting in July and not any sooner than that unless something unexpected happens in the economy that warrants lower interest rates,” Landsberg said.

Tom Lee, head of research at Fundstrat Global Advisors, said his team leans that markets will continue to rally in the last three trading days in 2023, given the strength of December already, which has seen the S&P 500 rise 4.5% so far this month.

“Given the trailing performance of fund managers, and the notion of ‘never short a dull market,’ we see the drift higher into the final days of 2023,” Lee said in a Wednesday client note.

That bullish narrative was being additionally supported Wednesday by a mostly positive return to trading by markets that were closed for an extended Christmas break, such as the U.K.
UK:UKX,
Germany
DX:DAX,
Australia
AU:XJO
and Hong Kong
HK:HSI.

Indeed, Hong Kong and mainland China markets
CN:SHCOMP
were buoyed by a rebound for gaming stocks after Beijing appeared to take a more conciliatory tone toward the sector. American depositary shares of NetEase Inc.
NTES,
-5.02%
were down 5.1% on Wednesday morning after rising as much as 14% in Hong Kong trading.

Companies in focus

• Shares of Cytokinetics Inc. 
  CYTK,
  +73.68%
   jumped 71%, after the cardiovascular biopharmaceutical company announced positive results from a Phase 3 trial of aficamten, a treatment for hypertrophic cardiomyopathy (HCM).

• Iovance Biotherapeutics Inc.’s stock
  IOVA,
  -21.15%
   fell 21% after the cancer therapy company said the U.S. Food and Drug Administration placed a clinical hold on its trial for IOV-LUN-202. 

• New York Times
  NYT,
  +2.67%
  shares rose 2.3% after the media company filed a federal copyright lawsuit against Microsoft Corp. and ChatGPT creator OpenAI in a legal action expected to shape the debate over generative-artificial-intelligence technologies. Microsoft
  MSFT,
  -0.24%
  shares were off 0.1%.

Jamie Chisholm contributed.