Market Highlights: Record Closes Amid Rate Cut Optimism – The Dow and Nasdaq secured record closes on Friday, fueled by optimism for potential rate cuts next year. However, Federal Reserve attempts to temper expectations for aggressive rate cuts had some impact.

1. Record Closes: By 16:00 ET (21:00 GMT), the Nasdaq 100 surged 0.3% to a record close of 16,623.45, surpassing its previous record on Nov. 21. The Dow Jones Industrial Average rose 0.1%, reaching a record close for the third consecutive session. Although the S&P 500 closed 0.1% lower, it achieved its seventh-straight weekly win.

2. Fed Williams on Rate Cuts: New York Fed President John Williams addressed CNBC, emphasizing that talk of rate cuts is “premature.” He suggested that the central bank could tighten policy if necessary. Williams’ remarks aimed to curb aggressive rate cut expectations for the coming year, leading to a boost in Treasury yields. The 2-year Treasury yield, sensitive to Fed decisions, rose 5 basis points to 4.451%, while the 10-year yield fell 2 bps to 3.915%.

3. Economic Front: On the economic front, December witnessed a larger-than-expected decline in manufacturing activity. However, the services sector, a significant component of inflation, experienced a more substantial increase.

4. Corporate Earnings:

  • Costco Wholesale (COST): The membership-only retailer’s stock climbed 4.5% after surpassing quarterly sales and profit projections. Demand for budget-friendly groceries contributed to Costco’s positive performance, and the company announced a special dividend.
  • Lennar Corporation (LEN): Despite better-than-expected Q4 results, Lennar faced a more than 3% decline. Concerns over Q1 margin guidance amid uncertainty about interest rates impacted the stock.

5. Market Moves:

  • DocuSign Inc (DOCU): DocuSign witnessed a more than 12% rise following reports of the company considering a sale. Talks are in the early stages, attracting potential interest from private equity or tech firms.
  • Darden Restaurants Inc (DRI): Despite Q2 results exceeding estimates, Darden Restaurants’ stock faced a slight decline. Full-year sales guidance fell short of expectations, leading to cautious market sentiment.

6. Crude Prices: Oil prices settled lower on Friday, but marked the first weekly gain in two months. Increased optimism for demand growth next year and a weaker dollar contributed to the positive momentum. Energy stocks, including Coterra Energy Inc (CTRA), Marathon Petroleum Corp (MPC), and Kinder Morgan Inc (KMI), experienced a decline for the day.

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