Wall Street hits new 2023 highs after inflation data. Fed on Deck By Reuters

© Reuters. Traders are working on the New York Stock Exchange (NYSE), USA, on December 11, 2023. REUTERS/Brendan McDermid

Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks closed at a yearly high on Tuesday after inflation data did little to change views on the timing of the Federal Reserve’s rate cut as investors awaited the Federal Reserve’s final policy decision of the year. On Wednesday.

The consumer price index (CPI) rose 3.1% annually in November, in line with estimates from economists polled by Reuters, as lower gasoline prices were masked by rising rents. Core prices, excluding items with large fluctuations such as food and energy, rose by an average of 4% per year, meeting expectations.

Compared to the previous month, consumer prices rose 0.1% compared to the previous month, leaving the forecast unchanged.

Markets have been pricing in a Fed rate cut as recently as March, but traders have scaled back on those bets and are now targeting May for the central bank’s first rate cut after it begins its hiking cycle in March 2022.

Expectations for a cut of at least 25 basis points in March have fallen to 43.7% from about 50% before the data was released, according to CME Group (NASDAQ:)’s FedWatch Tool. Markets currently rate the odds of a rate cut in May as high at around 78%, up from around 75% on Monday.

“Markets are clearly assuming that inflation will continue to fall, that we will see some decent growth next year and that the Fed will cut interest rates,” said Scott Wren, senior global markets strategist at Wells Fargo. Investment Institute in St. Louis.

“Markets are hoping for a soft landing, with more Fed easing.”

It closed at 36,577.94, up 173.01 points (0.48%), at 4,643.70, up 21.26 points (0.46%), and at 14,533.40, up 100.91 points (0.70%).

The Dow closed at its highest since January 4, 2022, the S&P 500 closed at its highest since January 14, 2022, and the Nasdaq closed at its highest since March 29, 2022.

Ren also said stocks face resistance at this year’s highs and are unlikely to see a strong rally in the near term.

Another factor dampening volatility could be option expirations over the weekend. It’s the 19th consecutive session the S&P 500 has failed to move 1% in either direction. This is the longest streak since August.

Markets will look again at inflation data in the form of the Producer Price Index (PPI) before all eyes turn to the Federal Reserve’s policy announcements after its two-day meeting on Wednesday.

The European Central Bank and Bank of England are also expected to release their policy verdicts later this week.

Oracle (NYSE:) fell 12.44% as the cloud services provider said it expects third-quarter revenue to be lower than expected due to slowing demand for cloud services.

The energy sector was the worst performer among the 11 major S&P sectors, down 1.35% as crude oil prices fell nearly 4%. But the technology sector was the best performer, rising for the fourth straight session and posting the largest annual increase since 2019, hitting an all-time high of 3,344.07.

Google parent Alphabet (NASDAQ:) fell 0.58% after “Fortnite” maker Epic Games won a major antitrust trial against the company.

Advancers outnumbered decliners nearly evenly on the NYSE, while decliners outnumbered advancers by a 1.3-to-1 ratio on the Nasdaq.

The S&P 500 recorded 74 new 52-week highs and two new lows, while the Nasdaq recorded 198 new lows and 187 new lows.

Volume on U.S. exchanges was 10.52 billion shares, compared to an average of 10.95 billion shares for the full session over the last 20 trading days.