Stocks mixed as rate cut doubts set in

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Stocks were in mixed territory Friday, with the Dow pulling back slightly even as the prospect of deeper and earlier interest-rate cuts continued to buoy Wall Street’s spirits.

The Dow Jones Industrial Average (^DJI) ticked down 0.2%, or about 70 points, after the blue-chip index closed at a fresh all-time high Thursday. The S&P 500 (^GSPC) was virtually unchanged, while the tech-heavy Nasdaq Composite (^IXIC) gained 0.2%.

Markets rejoiced after the Federal Reserve’s surprise shift in tone to dovish this week, as it signaled more rate cuts in 2024 and acknowledged its anti-inflation campaign is gaining traction. That has helped drive a record-setting rally in US stocks, and the major indexes have posted six winning sessions in a row.

Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards

But the ebullient mood may start to fade, as some observers caution that markets could be getting ahead of themselves. New York Fed President John Williams told CNBC in an interview Friday that talk of rate cuts is “premature.” And in contrast to the Fed’s recent signaling, central banks in Europe discouraged hopes for an easing of policy.

Meanwhile, some $5 trillion in US stock options are set to expire on Friday, 80% in S&P 500-linked contracts. The largest such expiration in at least 20 years could keep a lid on any pullback, some analysts believe.

Elsewhere, oil ticked higher, on track for its first weekly win since October and boosted by a Fed-fueled fall in the dollar. West Texas Intermediate (CL=F) futures traded at almost $72 a barrel, while Brent crude futures (BZ=F) changed hands at about $77 a barrel, after rising more than 4% in the previous two sessions.

Live4 updates

  • Fed’s John Williams says rate cut talk is ‘premature’

    New York Federal Reserve President John Williams said Friday that the central bank is not discussing rate cuts even as the market has run with the optimistic narrative that the central bank’s tightening campaign is coming to an end.

    “We aren’t really talking about rate cuts right now,” he said during an interview on CNBC’s “Squawk Box.” He said that officials are instead focused on what Chair Powell has said is the primary goal at the moment: setting monetary policy to pull inflation back down to 2%.

    Following Powell’s remarks on Wednesday, Wall Street stepped on the gas, interpreting the central bank’s latest outlook as one that would invite deeper rate cuts than previously expected. That has helped drive a record-setting rally in US stocks, and the major indexes have posted six winning sessions in a row.

    But the optimism has already started to fade, as Williams and other market watchers pump the breaks on the exuberant mood.

    For now, Williams said talk of rate cuts is “premature.”

  • Manhattan rents drop for first time in more than two years

    Manhattan tenants may increasingly be finding themselves in the driver’s seat when it comes to negotiating with landlords.

    The market’s median rent dipped to $4,000 in November, a 4.6% drop from October and a 2.3% decline from a year ago, according to a report released this week from brokerage firm Douglas Elliman and real estate appraiser Miller Samuel. It was the first time in 27 months that the monthly median rent had fallen year-over-year.

    New lease signings were up 9.7% year-over-year but down nearly 29% from October. Meanwhile the vacancy rate in November was 2.9%, up from 2.4% a year ago and 2.8% in October.The Manhattan market is of interest nationally because it’s one of the largest rental markets in the country and offers a lens into demand from affluent renters. The pandemic caused an exodus that upended normal leasing patterns, but in 2022 New York’s expats returned in droves, spurring bidding wars and pushing prices to record highs.

    Nationwide, the rental market has been cooling, in part because there’s a lot more inventory, pushing landlords to grapple with rising vacancies and giving them less leverage to raise rents. Seasonality may also be a factor, as demand is lower in colder months.

  • Stocks open mixed but slated for winning week

    Stocks opened on either side of the flatline Friday as investors caught their breath after an initial rush of optimism on hopes of deeper and earlier interest-rate cuts next year.

    The Dow Jones Industrial Average (^DJI) ticked down 0.2%, or about 75 points, after the blue-chip index closed at a fresh all-time high Thursday. The S&P 500 (^GSPC) also moved down 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) gained 0.2%.

  • Manufacturing highlights sparse schedule

    A preliminary look at manufacturing data in December highlights a relatively quiet economic and corporate calendar on Friday.

    Economists expect the initial look at manufacturing and service sector activity from S&P Global published Friday morning to show activity continued contracting in the manufacturing sector and expanded at a modest rate in the services sector this month.

    On the corporate side, results from Darden Restaurants (DRI) should serve as the long notable highlight.

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