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Stock Market Today: Wall Street Drifts Near Record Levels, Heads for an 8th Straight Winning Week

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By Stan Choe AP Business Writer

New York (AP) — Wall Street is drifting near record heights Friday following reports showing inflation on the way down and the economy potentially on the way up. online news

The S&P 500 was 0.3% higher in midday trading and just 0.7% below its record set nearly two years ago. The Dow Jones Industrial Average was up 38 points, or 0.1%, as of 11:15 a.m. Eastern time, and the Nasdaq composite was 0.3% higher.

Bristol Myers Squibb climbed 2.5% after saying it will buy Karuna Therapeutics in a cash deal valued at a total of $14 billion. That helped to offset a 10.5% slump for Nike, which cut its revenue forecast this fiscal year. The athletic giant cited weakness in China, the downsides for exporters of a stronger U.S. dollar and other challenges.

But Wall Street’s focus was squarely on a suite of economic reports released Friday, which led to some swings in Treasury yields.

Falling yields have been a primary reason the stock market has charged roughly 15% higher since late October. Not only do they boost the economy by encouraging borrowing, they also they relax the pressure on the financial system and goose prices for investments. They’ve been largely easing on hopes that inflation has cooled enough for the Federal Reserve to cut interest rates in 2024.

A report on Friday showed the measure of inflation the Federal Reserve prefers to use slowed by more than economists expected, down to 2.6% in November from 2.9% a month earlier. It echoed other inflation reports for November released earlier in the month.

The latest numbers also showed spending by U.S. consumers unexpectedly rose during the month. While that’s a good sign for growth for an economy driven mainly by consumer spending, it could also indicate underlying pressure remains on inflation.

The Federal Reserve is walking a tightrope, seeking to slow the economy enough through elevated interest rates to cool inflation, but not so much that it tips into a recession. A stronger-than-expected economy could complicate that balancing act.

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Other reports on Friday showed orders for long-lasting manufactured goods strengthened more in November than expected, sales of new homes unexpectedly weakened and sentiment for U.S. consumers improved.

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The yield on the 10-year Treasury edged up to 3.90% from 3.89%, where it was late Thursday. But it bounced a couple of times following the reports’ release.

In October, the 10-year yield was above 5% and putting painful downward pressure on the stock market.

“People are tightening their belts, but they’re not suffocating their spending,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Inflation has moderated significantly and the run-rate for inflation is now at the Fed’s target, if not lower.”

Traders are largely betting the Federal Reserve will cut its main interest rate by at least 1.50 percentage points by the end of next year, according to data from CME Group. The federal funds rate is currently sitting within a range of 5.25% to 5.50% at its highest level in more than two decades.

The Federal Reserve released projections last week showing its typical policymaker expects to cut the federal funds rate several times next year, but likely by only half as much as what Wall Street is expecting.

Critics see too much optimism on Wall Street about how many rate cuts may come in 2024 and when they could begin. They warn the big run for stocks since late October on anticipation of such support may be overdone. The S&P 500 is on track for an eighth straight winning week, which would be its longest such streak since 2017.

In stock markets abroad, indexes were mixed in Europe and Asia.

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Hong Kong’s Hang Seng dropped 1.7% after China released new regulations for online gaming. That sent stocks of Tencent, China’s largest gaming company, and rival NetEase down sharply.

AP Business Writer Elaine Kurtenbach contributed.

All contents © copyright 2023 Associated Press. All rights reserved

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Notes from APS Radio News

Recently it was reported that Federal Reserve Chairman Jerome Powell had hinted or suggested that at various times during the next year the Federal Reserve might reduce interest rates, as its inflation goal seemed to be closer to being realized.

On the strength of such talk, even in the context of differing opinions expressed at the central bank, where inflation is concerned or headed, many investors have been more enthusiastic about the markets.

At the same time, also it’s been reported that credit card debt is at a record level.

Earlier this year, Reuters reported a similar record, where corporate debt was concerned.

Reportedly because of what was being called a “pandemic”, a number of the world’s central banks embarked on massive programs of monetary expansion, starting in late February and early March of 2020.

For its part, between the early part of March of 2020 to over a year later, the US Federal Reserve added over $4 trillion to its holdings, by purchasing billions of dollars’ worth of Treasury bonds and corporate bonds each month during that period.

As well, at that time it kept interest rates rather low.

Other central banks, including the Bank of Japan and the European Central Bank, followed similar policies.

In addition, during that period many countries engaged in lockdowns; many small and medium-sized businesses and enterprises were shuttered by way of orders issued by public health officials, politicians and various administrators.

One of the direct causes of those shutdowns was the development of shortages.

According to a number of economists, the combination of shortages of various goods and services and massive programs of “quantitative easing” led to substantially higher rates of inflation.

In consequence of shuttered economies and higher rates of inflation in the first world, less developed countries suffered greatly, due, in part, to shortages of supplies and due to lowered demand.

For some time, in its articles about China, The Wall Street Journal has pointed to “covid” related lockdowns as being one of the major causes of China’s downturn in its economy.

In the US, by October of 2020, over 100,000 businesses had been shuttered by way of lockdowns

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