Dow Rises as Inflation Cools Once More, Focus Turns to Pending Fed Decision
On Tuesday, the Dow surged, primarily led by the tech sector, riding on the continuing slowdown in inflation. This decline in inflationary pressure bolstered hopes for an early rate cut next year, coinciding with the imminent monetary policy decision by the Federal Reserve scheduled for Wednesday.
At 4:00 PM ET (9:00 PM GMT), the Dow Jones Industrial Average, comprising 30 major stocks, climbed by 173 points or 0.5%. Similarly, the S&P 500, considered a benchmark, and the tech-heavy Nasdaq Composite each gained 0.5% and 0.70%, respectively. This propelled Wall Street’s main indices to fresh 52-week highs, with the S&P 500 reaching its peak level since January 2022.
The pace of inflation continued to ease, capping Treasury yields
The latest data from the Bureau of Labor Statistics revealed a slight deceleration in annual headline consumer price growth to 3.1% last month, down from October’s 3.2%. Predictions for these measures by economists stood at 3.1% and 0.0%, respectively. The crucial “core” figure, excluding volatile elements like food and energy, maintained its annual rise at 4.0%, consistent with the previous month. On a monthly basis, the underlying price gains slightly accelerated to 0.3% compared to October’s 0.2%, aligning with estimates.
In response to this data, expectations for a rate cut in the first half of the year remained robust, with approximately 50% of traders forecasting a cut in May, as indicated by Investing.com’s Fed Rate Monitor Tool. This resulted in a decline in Treasury yields, with the 10-year Treasury yield dropping by 3.3 basis points to 4.206%.
Oracle and Hasbro face setbacks
Oracle Corporation (NYSE:ORCL) experienced a significant dip of more than 12% as the company reported quarterly revenue below Wall Street estimates, attributed to sluggish cloud growth. Similarly, Hasbro Inc (NASDAQ:HAS) encountered a 1% decline after announcing plans to reduce its workforce by about 20% due to ongoing challenges stemming from declining toy sales.
Federal Reserve’s two-day meeting underway
The Federal Reserve initiated its two-day meeting, widely anticipated to conclude with the decision to maintain unchanged rates. Market attention is keenly focused on the Fed’s projections, particularly the “dot plots,” amidst expectations for an augmented number of cuts next year.
Epic Games prevails in Google antitrust lawsuit
In a significant antitrust lawsuit, a federal jury ruled against Google in a case brought by Epic Games, the creator of “Fortnite.” This legal battle contended that Google utilized its Play app store as an illegal monopoly, imposing high fees on developers and stifling competition in the Android app market. The jury favored Epic Games on all counts, and the court is set to determine the changes Google must implement in January. Google has stated its intention to appeal the ruling.
Energy sector dragged down by oil slump
Energy stocks faced a decline of more than 1% following a tumble in oil prices on Tuesday. Concerns over surplus supply outweighed the impact of an attack on a commercial chemical tanker by Iran-aligned Houthis. Companies like Occidental Petroleum Corporation (NYSE:OXY), Marathon Oil Corporation (NYSE:MRO), and Devon Energy Corporation (NYSE:DVN) were among the prominent decliners in this sector.
A federal judge in Virginia dismissed Centripetal Networks’ patent infringement claims against Cisco Systems in a multi-billion-dollar battle over network-security technology. The case, previously awarded $2.75 billion in damages to Centripetal in 2020, marked the largest patent damages award in U.S. history by U.S. District Judge Henry Morgan.
However, following an appeal due to ethical concerns—Morgan’s ownership of Cisco stock—the original decision was overturned. With Morgan’s passing, U.S. District Judge Elizabeth Hanes presided over the new hearings and ruled on Monday in favor of Cisco, stating that they did not infringe the patents.
Centripetal, based in Reston, Virginia, initiated the lawsuit against Cisco in 2018, alleging that Cisco’s routers, network-security software, and other products infringed on patents related to Centripetal’s technology for blocking security threats from entering computer networks.
Morgan’s initial ruling favored Centripetal in 2020, awarding $1.9 billion in damages plus royalties that Cisco argued elevated the total to over $2.7 billion. However, Morgan disclosed his wife’s ownership of 100 shares of Cisco stock, valued at $4,688, before issuing the ruling, asserting that it hadn’t influenced his handling of the case.
The U.S. Court of Appeals for the Federal Circuit nullified the award and returned the case to the Virginia court, emphasizing that Morgan should have either recused himself or ensured the stock’s sale. Subsequently, the U.S. Supreme Court opted not to review the Federal Circuit’s decision.
Investing is like planting a garden in the financial world—you carefully select your seeds, nurture them with patience and diligence, and occasionally fend off pesky market pests. With a sprinkle of strategy and a dash of foresight, you watch your portfolio bloom into a colorful array of assets, growing not just wealth but a testament to your financial green thumb. Just remember, much like a well-tended garden, investing requires a blend of knowledge, timing, and a willingness to weather the occasional storm to reap the sweet fruits of your labor.