The S&P 500 (Index: SPX) rose for the seventh week in a row. The index closed out the week at 4719.19, almost a 2.5% increase over where it closed the previous week.

Almost all of that upward movement came on Wednesday, 13 December 2023 after 2:00 PM, when the Federal Reserve first announced it would hold the Federal Funds Rate steady in a target range of 5.25 to 5.50%, then signaled in the following press conference by Federal Reserve Chair Jerome Powell that the U.S. central bank would pivot to cut interest rates in 2024. The change effectively reverses the expectation the Fed would continue following a more hawkish policy that had been voiced by Powell as recently as 1 December 2023.

After the bulls were let loose on Wednesday, the S&P drifted slightly higher through the rest of the week as Fed officials sought to walk back some of the change in expectations for the course of how interest rates would change during 2024 they had unleashed.

These changes are captured in the latest update of the alternative futures chart. We've also added a new redzone forecast range to account for the echoes of past volatility that arises from the dividend futures-based model's use of historic stock prices as the base reference points from which it projects the potential trajecgtories of the S&P 500 into the future.

This new redzone forecast range assumes investors will shift their forward-looking focus from 2024-Q4, where we established it was in the previous edition of the S&P 500 chaos series, back toward 2024-Q1, which coincides with the expected timing of when investors anticipate the Fed will start cutting interest rates.

That change in the forward time horizon of investors wasn't the only expectation that changed during the past two weeks. The outlook for dividends has also substantially improved during the past month, as shown in the next chart.

Nearly all of the change in the outlook for dividends in 2024 took place during the past two weeks.

Other things also happened during the trading week ending on Friday, 15 December 2023. Here is our summary of the week's market moving headlines.

Monday, 11 December 2023

• Signs and portents for the U.S. economy:
  • Oil settles slightly higher, investors still wary
  • Global trade to contract by 5% in 2023, UN body says
• Speculation builds Fed minions will end quantitative tightening in 2024, Fed minions say Americans are right to be gloomy:
  • Sharp Fed liquidity drain hints at early end for balance sheet runoff
  • US public's downbeat view of economy is real, Chicago Fed research shows
• Bigger stimulus, trouble developing in China:
  • China's leaders meet to discuss growth targets for 2024, say sources
  • China's consumer prices fall fastest in 3 years, factory-gate deflation deepens
• BOJ minions not quite ready to end never-ending stimulus:
  • Yen falls as Japan's negative rates expected to persist
• Nasdaq, S&P, Dow start week with gains as traders gear up for CPI data, Fed rate decision

Tuesday, 12 December 2023

• Signs and portents for the U.S. economy:
  • Oil holds soft tone on oversupply concerns, markets await Fed
  • Stubbornly high rental costs lift US consumer inflation in November
• Bigger trouble dodged in China, for now, while bigger stimulus develops:
  • China's Country Garden may avoid yuan bond default after deal - Bloomberg News
  • China says it will step up policy adjustments to spur recovery in 2024
• BOJ minions looking to keep never-ending stimulus alive a little longer:
  • BOJ wants markets ready for a policy shift - just not so soon
• Nasdaq, S&P, Dow end higher after latest CPI report; focus turns to Fed rate decision

Wednesday, 13 December 2023

• Signs and portents for the U.S. economy:
  • Oil prices up 1% on big U.S. storage withdrawal, tanker attack in Red Sea
  • US bankruptcy wave may stretch into 2024, but pace could slow
• Expectations before the Fed minions' meeting:
  • Fed likely to hold rates steady, signal couple of cuts in 2024
• Fed minions to swing to rate cuts in 2024, noncommittal on ending quantitative tightening:
  • Powell "Pivots", Sends Dow To Record High With Election-Year Rate-Cut Projection
    • With rate hikes likely done, Fed turns to timing of cuts
    • US rate futures lift March rate cut bets after Fed flags end of tightening
    • Fed 'Dots' Signal Major Dovish Pivot For Election Year
  • Fed's Powell not ready to say when balance sheet wind-down ends
• Bigger stimulus developing in China:
  • China Nov bank loans rise less than expected, more easing expected
• BOJ minions try to play coy after signaling the end of never-ending stimulus is coming:
  • Japan's central bank to sit tight on policy, may drop hints on pivot
• Bigger trouble developing in the Eurozone:
  • Euro zone industry output falls by more than expected in October
• S&P, Nasdaq rise while Dow scales 37K for new record high after Fed sees rate cuts in 2024
  • Dow ends at record high as Fed signals lower borrowing costs in 2024
  • Apple reaches record high close as Fed signals rate cuts

Thursday, 14 December 2023

• Signs and portents for the U.S. economy:
  • Oil rises 3% on IEA demand upgrade, weaker dollar
    • World oil demand next year to rise faster than expected, IEA says
  • US economy still resilient as retail sales beat expectations, layoffs stay low
  • US mortgage rates fall below 7% for first time since August
• Fed minions expected to deliver rate cuts sooner:
  • Fed seen pivoting to interest rate cuts in March, perhaps earlier
  • Fed rarely cuts rates at a 'measured pace'
• Bigger stimulus developing in China:
  • China's c.bank set to boost liquidity injection but keep key rate unchanged
• BOJ minions looking to exploit Japan government political scandal:
  • Japan's political scandal may clear path for easy policy exit
• ECB, BOE minions claim they don't want to cut rates:
  • ECB resists rate cut bets with pledge to stay tight
    • ECB has tough job to fight rate cut bets as inflation falls
  • Fed stands alone as ECB, BoE stick with tight policy
• Nasdaq, S&P, Dow end higher as Fed pivot rally continues despite some buying fatigue
  • Dow scores second record close in a row on lower-rate bets

Friday, 15 December 2023

• Signs and portents for the U.S. economy:
  • Oil prices take a small loss in seesaw session
  • CBO projects 1.5% U.S. GDP growth in 2024, 4.4% jobless rate
  • US PMIs Suggest "Weak GDP Growth" In Q4, Prices Remain "Elevated"
• Fed minions try to put damper on dovish pivot:
  • Fed's Williams douses Wall Street's rate-cut speculation
  • Exclusive: Fed's Bostic sees two rate cuts, soft landing next year
• Calls for bigger stimulus developing in China:
  • China's weak property sector, retail sales keep stimulus calls alive
• Bigger trouble developing in the Eurozone:
  • German economic activity deteriorates in Dec-PMI
• Nasdaq, S&P, Dow notch seven-week win streak after Fed's dovish pivot
  • S&P 500 posts longest weekly winning streak since 2017; finishes flat on day
  • US bank stocks drop as Fed policymaker plays down rate-cut expectations

The CME Group's FedWatch Tool projects the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 20 March 2023 (2024-Q1), six weeks earlier than expected a week ago, when the Fed is expected to start a series of quarter point rate cuts at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool's estimate of real GDP growth for the current quarter of 2023-Q4 rose to an annualized growth rate of 2.6% after having held steady at a +1.2% growth rate during the preceding two weeks. The Atlanta Fed's nowcast increased thanks to reports of higher personal and government spending figures along with higher business investments in the past week.

This article is the last for the S&P 500 chaos series in 2023. We'll be back with a new edition covering the last weeks of December 2023 sometime early in 2024!

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