Open: U.S. stocks open slightly higher The market is focused on the Fed's policy path

On the evening of the 19th, Beijing time, U.S. stocks opened slightly higher on Tuesday, and major stock indexes continued their recent upward trend. U.S. housing starts were stronger than expected in November. Markets are assessing the Fed's future policy path. Traders are betting that interest rates will be cut next year, but a number of Fed officials have tried to verbally dampen excessive optimism about rate cuts.

The Dow rose 36.66 points, or 0.10 percent, to 37,342.68, the Nasdaq added 17.53 points, or 0.12 percent, to 14,922.73 and the S&P 500 added 4.19 points, or 0.09 percent, to 4,744.75.

U.S. stocks closed higher on Monday, with the S&P 500 up 0.45%, just 1.2% short of its all-time high closing of 4,796.56, set in January 2022.

The tech-heavy Nasdaq Composite rose 0.6%. The Dow Jones 30 rose 0.86 points, hitting a new intraday and closing all-time high. The Dow and Nasdaq both posted their eighth consecutive session of gains.

U.S. stocks have recently entered upward mode, and all three major stock indexes have now recorded their seventh consecutive week of gains. Last week's indications that the Fed could cut interest rates three times in 2024 gave new momentum to U.S. stocks. In addition, signs of cooling inflation and a pullback in US Treasury yields have also boosted investors' risk investment appetite.

Whether the three major U.S. stock indexes can record their eighth consecutive weekly gains this week may depend on recent data, including durable goods orders, personal consumption expenditures (the Fed's preferred measure of inflation) and final third-quarter gross domestic product (GDP).

Emily Roland, co-chief investment strategist at John Hancock Investment Management, said: "The market is now celebrating, not just deflation, but also a soft landing scenario. The Fed has said they think we are in a soft landing. We see risk assets fully involved. ”

The Fed's dovish policy shift forced even the staunchest bears on Wall Street to change their views on the US stock market.

Wilson, one of the biggest pessimists among sell-side strategists, said the Fed's pivot last week was "positive for equities."

Piper Sandler's Kantrowitz, who has the most pessimistic outlook for the S&P 500 this year, also said that the stock market rally is likely to continue, and that the rise may be extensive. And the capitulation of these "big shorts" may mark a turning point.

Goldman Sachs chief economist Jan Hatzius said on Monday that cooling inflation would set the stage for the Federal Reserve to cut interest rates up to five times next year. He predicts that the Fed will cut rates by 25 basis points three times in a row between March and June next year, and then cut rates two more times in the second half of next year.

UBS noted in a note on Tuesday that U.S. stocks rallied last week after a surprise dovish release from the Federal Reserve, prompting hedge funds to quickly unwind their short positions in U.S. stocks. The bank believes that the inflow of funds into U.S. stocks last week was mainly driven by a large amount of short covering on Thursday and Friday.

Atlanta Fed President Raphael Bostic will speak on Tuesday. Bostic is a member of the Federal Open Market Committee (FOMC) for 2024.

After the Fed's apparently dovish pivot last week, Chicago Fed President Goolsbee and Cleveland Fed President Mester joined a growing number of central bankers seeking to temper market optimism about rate cuts.

Chicago Fed President Goolsbee said he was surprised by the market's huge reaction to the Fed's dot plot. Goolsbee said on Monday: "I'm a little confused if the market is just thinking that we're finally saying what they want to hear. I think they have a bit of a misunderstanding of how the Federal Open Market Committee (FOMC) works. We will not engage in speculative debates about specific policies in the future. ”

Cleveland Fed President Mester also said that the market's bets on an early rate cut in 2024 are a bit ahead of the curve.

"While the market is watching, the next phase is not about when to cut interest rates," Mester said. The key is to figure out how long monetary policy should remain at a repressive level so that inflation can return to the 2% target in a sustained and timely manner."

Henry Allen, a strategist at Deutsche Bank, said: "Obviously, the market is expecting a much larger rate cut than it was before the Fed's decision last week, but the comments from a number of officials since last Friday have made investors more skeptical about the possibility of aggressive easing." ”

On Tuesday's economic data front, the U.S. Department of Labor reported that the total number of housing starts in the United States in November was 1.56 million on an annualized basis, with an expectation of 1.36 million and a previous value of 1.372 million. The total number of construction permits in November was 1.46 million, with an expected 1.465 million and a previous value of 1.487 million.

Stocks in focus

Tesla has notified hourly workers at its Sparks battery plant in Nevada that the wages of some fixed-wage hourly workers will increase by about 10% starting in January 2024. The pay rise could help Tesla discourage workers from unionizing and employee interest in pushing for collective agreements in Nevada.

According to media reports on Tuesday (December 19), well-known Apple whistleblower Mark Gurman recently revealed that Apple is planning a "rescue mission" for the Apple Watch to save the business worth nearly $17 billion. Apple's rescue could include software fixes or other workarounds, Gurman said, and Apple engineers are racing against the clock to revise the algorithm that measures users' blood oxygen levels on the device.

Alphabet's Google Inc. has agreed to pay $700 million for the settlement and allow more competition on its Play app store, according to the terms of the antitrust settlement revealed in federal court in San Francisco on Monday.

American ride-hailing giant Lyft is in the spotlight. On December 14, co-founder and vice chairman John Zimmer sold $3.5 million worth of shares, and president Kristin Sverchek sold $85,035 worth of shares, according to regulatory filings on Monday.

According to the news, ASML will launch 2nm process node manufacturing equipment in the next few months, and plans to produce 10 2nm devices in 2024, of which Intel has procured. ASML plans to increase the production capacity of such chip manufacturing equipment to 20 units per year in the coming years.

European investment firm Cevian buys UBS for 1.2 billion euros.

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Goldman Sachs raised its price target on Sunrun to $20 and downgraded SunPower to "sell".