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CNBC Daily Open: Too early to be betting on rate cuts?

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Federal Reserve Board Chairman Jerome Powell speaks after a Federal Open Market Committee meeting on November 01, 2023 at the Federal Reserve in Washington, DC.

Kevin Dietsch | Getty

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Fed Chair Powell says too ‘premature’ to cut rates
Federal Reserve Chairman Jerome Powell said Friday it was too early to declare victory over inflation and beat back on market views for interest rate cuts next year. “It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in prepared remarks. Markets perceived his comments as dovish, sending stocks higher and Treasury yields sharply lower.

S&P 500 soars to 2023 high  
The S&P 500 rose 0.59% Friday to close at a new high for 2023, extending a strong rally from November. The Nasdaq Composite ended 0.55% higher, while the Dow Jones Industrial Average added 0.82%. The benchmark index closed at its highest level since March 2022 as investors were hopeful that that the Fed might be done with raising interest rates. Asia-Pacific markets were mixed Monday, with Japan’s Nikkei 225 down 0.6% and South Korea’s Kospi up 0.4%.

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Bitcoin crosses $40,000
Bitcoin breached the $40,000 mark for the first time this year on Monday in Asia, hitting a 19-month high bolstered by anticipation of a bitcoin exchange-traded fund approval and bets on U.S. interest rate cuts. This comes after scandals shook the crypto markets, including the collapse of FTX in November last year. Bitcoin is now up more than 145% since the beginning of the year.

Evergrande liquidation court hearing pushed
Beleaguered Chinese property firm Evergrande‘s court hearing over its possible liquidation was postponed to Jan. 29, sending its shares up over 9%. A Hong Kong court hearing was initially set for Monday over a petition from a creditor seeking to wind up the company. Shares of the firm have plunged almost 85% so far this year.

[PRO] Where to invest $250,000 for the next 5 years?

Major changes have taken place in the economy over the past five years. A long-standing zero-interest rate regime has given way to rising rates, leading to higher borrowing costs — a situation usually bad for stocks. CNBC Pro spoke to financial advisors and investment experts to find out how they would allocate $250,000 over the next five years.

The bottom line

Wall Street is off to a solid start this December, with the major averages recording their fifth straight week of gains on Friday.

This comes on the back of November’s spectacular rally which saw markets snapping a three-month losing streak, driven by bets that the Fed may just be done with raising rates and could even start cutting them as soon as the first half of next year.

There was, however, pushback from Fed Chair Jerome Powell, calling the talks of cuts “premature”. But stock markets took heart from what traders perceived as a clearly dovish message from the central bank chief.

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“There’s a trifecta of drivers here. The first is the inflation. Second is the Fed seeming like it may be stepping to the sidelines, and the third is this cooling in the economy that is starting to unfold, but at a very gradual pace,” said Mona Mahajan, senior investment strategist at Edward Jones.

“It’s almost like a Goldilocks cooling. It’s not too hot. It’s not too cold. And that’s exactly what markets are embracing.”

Powell’s remarks cemented views that the Fed is at least done raising rates. Powell also noted that inflation was “moving in the right direction.”

Fed’s meeting on Dec. 13 will help clear the air on its interest-rate plans.

Source: CNBC

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