Dow up more than 400 points as consumer confidence rises

Dow up more than 400 points as consumer confidence rises

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U.S. stocks were sharply higher Wednesday, as investors digested data showing a rise in U.S. consumer confidence. Stocks are extending gains after Wall Street snapped a losing streak as the long Christmas weekend nears.

How are stocks trading?
  • The Dow Jones Industrial Average

    was up 470 points, or 1.4%, at 33,320.

  • The S&P 500

    rose 51 points, or 1.3%, to 3,872.

  • The Nasdaq Composite

    advanced 146 points, or 1.4%, to 10,693.

On Tuesday, the S&P 500, Dow industrials, and Nasdaq Composite posted modest gains, snapping a four-day string of losses.

What’s driving markets?

The Conference Board said Wednesday that U.S. consumer confidence “bounced back in December,” after back-to-back monthly drops. Its consumer confidence index jumped to an eight-month high of 108.3 in December, exceeding forecasts from economists polled by The Wall Street Journal.

Read: Consumer confidence hits 8-month high as worries about inflation and recession fade

But Matt Lloyd, chief investment strategist at Advisors Asset Management, expressed caution over the stock market’s sharp move higher Wednesday.

“These moves that you see today are just head fakes,” Lloyd said in a phone interview. “There’s less volume” in trading heading into the end of the year, leading to exaggerated moves in the market, he said.

“The problem is the economy really is fundamentally much weaker,” and earnings may have to drop “a lot more,” said Lloyd, adding that he’s expecting a recession in 2023.

Meanwhile, markets have brushed aside a surprise monetary shift by the Bank of Japan on Tuesday, when it raised the yield at which it allows the country’s 10-year government bond to trade. The move has been viewed by some investors as a first step toward the bank ending its era of ultra easy monetary policy, though BOJ Gov. Haruhiko Kuroda described the measure as neither a tightening nor a move toward the exit.

Read: Why the Bank of Japan’s surprise policy twist rattled global financial markets

“The BOJ announcement was a late-year surprise, but while it echoed the hawkish ECB (and that’s why stocks and bonds initially dropped) it isn’t a materially hawkish addition to the macro outlook, and that’s why stocks largely ignored it in the end,” said Tom Essaye, founder and president of Sevens Report Research, in a note Wednesday.

“More broadly, stocks are digesting the declines of the past two weeks,” he said. “While there are some notable employment and inflation numbers looming on Thursday and Friday, the bottom line is the calendar into year-end should be mostly quiet, again barring any material surprises.”

Investors are not ready to let go of the idea that the U.S. economy remains on firmer footing, despite recession worries, said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.

“Yes, the concerns are there that going in 2023, we are likely to see a recession taking place in the U.S., which the Fed denies for the time being. But given the robustness of the economy and the resilience in the economic numbers, it is unlikely to anticipate a scenario under which we will see a massive and prolonged period of crisis in the U.S.,” he told clients in a note.

Crude oil prices

were up more than 2% to trade above $78 a barrel, while the yield on the 10-year Treasury note

was down about one basis point at 3.67%, according to FactSet data, at last check.

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