S&P 500 extends rally after CME glitch, reversing monthly slide

[NEW YORK] US stocks notched a fifth-straight day of gains, as the Chicago Mercantile Exchange restarted operations following an earlier outage and expectations for a US Federal Reserve interest-rate cut next month remained intact.

The Dow Jones Industrial Average rose 0.61 per cent, to 47,716.42 points, the S&P 500 gained 0.54 per cent, to 6,849.09 points and the Nasdaq Composite added 0.65 per cent, to 23,365.69.

The Cboe Volatility Index hovered at around 16.

“Stocks have erased November’s losses during today’s shortened trading session, as confidence of a December rate cut coincide with favourable seasonals for markets,” said Jose Torres, senior economist at Interactive Brokers. “The positive backdrop has participants raising long exposures and positioning for a potential Santa Claus rally with every major sector and domestic benchmark in the equity space advancing, minus healthcare.”

The Chicago Mercantile Exchange (CME) restored most trading operations after an hours-long technical outage that crippled key parts of financial markets. The exchange’s Globex Futures & Options market opened at 8.30 am  New York time, while CME Direct was still unavailable.

“The stock market is always quiet and illiquid on the day after Thanksgiving,” said Miller Tabak’s Matt Maley. “With the issues the CME is dealing with, investor will be even more likely to sit on their hands today. So, it will be difficult to draw any conclusions from today’s action.”

Rate cut bets

Most US markets reopened for a shortened trading session following the Thanksgiving holiday. There was limited news expected on Friday (Nov 28) with no economic data scheduled for release and no planned speakers from the Fed ahead of the blackout period leading up to December’s interest-rate decision.

Markets are continuing to bet that the central bank will cut its benchmark next month. Swaps data shows traders have priced in almost a full quarter-point reduction since last week, when New York Fed president John Williams said he saw room to lower rates again in the near-term amid labour-market softness.

Markets seem to be driven mostly by changes in monetary policy expectations, according to Annex Wealth Management’s Brian Jacobsen.

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“Would a 0.25 percentage point reduction in the federal funds rate make a significant difference? Not by itself, but it carries important signalling value,” Jacobsen said. “A cut could indicate not only that the Fed recognises signs of a softening labour market, but – more importantly – that it is prepared to act in response.”

Economic data releases, both delayed and fresh, have helped traders get a better understanding on the strength of the consumer and the labour market. However, Miller Tabak’s Maley says investors are likely to want more information before locking in their views.

They “will likely want to get a better idea of how Black Friday does before they act on anything they learn about the consumer too quickly”, Maley said.

Among individual stocks, Tilray Brands slumped after announcing a one-for-10 reverse stock split of its common stock. BLOOMBERG, REUTERS