S&P 500 rebounds towards $4,750 on Thursday as equities rally on rate cut optimism

• The S&P 500 clawed back most of Wednesday’s declines as US inflation eases back faster than expected.
• Market bets of increased Fed rate cuts next year sparked a risk appetite recovery.
• Investors’ rate hike expectations risk running well ahead of what the Fed is willing to commit to in 2024.

The Standard & Poor’s (S&P) 500 major equity index climbed on Thursday to chew through late Wednesday’s losses as investor risk appetite surged higher after US inflation figures came in below expectations, ramping up investor hopes of a faster, deeper pace of rate hikes from the Federal Reserve (Fed) in 2024.

The Fed’s dot plot of interest rate expectations sees around 75 basis points in rate cuts through 2024. Thursday’s US data prints see markets pushing their 2024 median rate cut expectations to an eye-watering 160 basis points by the end of next December. 

Thursday’s market focus was US Core Personal Consumption Expenditures for the third quarter, which slipped to 2.0% versus the forecast steady print of 2.3%, bringing inflation measures down to a key target level for the Fed.

US Initial Jobless Claims ticked up slightly for the week into December 15, but much less than markets were expecting, printing at 205K versus the previous week’s 203K (revised up from 202K).

Adding onto easing expectations, US Annualized third quarter Gross Domestic Product (GDP) also softened on Thursday to round out the US data dump, coming in at 4.9% versus the forecast steady reading of 5.2%.

The S&P 500 gained 48.4 points on Thursday, climbing a little over one percent to close at $4,746.75.

The Dow Jones Industrial Average (DJIA) climbed over 322 points to close at $37,404, gaining eight-tenths of one percent.

Thursday’s big winner was the NASDAQ tech index, bolstered by chip manufacturers and tech stocks. The NASDAQ gained over one and a quarter percent to add nearly 186 points, wrapping up Thursday’s trading at $13,963.87.

S&P 500 technical outlook

The S&P 500 has recovered its footing from Wednesday’s backslide, returning to top side territory and the major index is now within reach distance of all-time highs beyond the $4,800 major handle at $4,812.38, set back in December of 2021.

The S&P has gained nearly 16% from October’s late lows near $4,100, and price action has run well above the 200-day Simple Moving Average (SMA) near $4,350.

The S&P’s latest bull run is pinning technical indicators into overbought conditions, with the Relative Strength Index (RSI) hitting 82.00, a level not seen since mid-2021.

S&P Daily Chart

S&P Technical Levels