U.S. stocks open higher as S&P 500 trades within a few points of record territory

What’s driving markets

U.S. stocks opened higher as the penultimate trading session of 2023 got underway, with all three major U.S. indexes at notable new highs.

Hopes for a soft landing for the U.S. economy and forecasts for a raft of interest rate cuts by the Federal Reserve next year have helped to push stocks higher since late October, bringing the S&P 500’s year-to-date advance to just shy of 25%, according to FactSet data.

“Investors are still in good spirits, toasting hopes of interest rate cuts in the U.S. coming sooner rather than later next year,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Indices have been powered higher, partly by optimism about a soft landing for the U.S.”

The index is trading within about 20 points of its record close of 4,796.56, set on Jan. 3, 2022.

Equity investors have also welcomed a recent sharp decline in benchmark borrowing costs as the 10-year Treasury yield

has fallen from more than 5% at its October peak to about 3.8% this week.

This week, sentiment got a boost from strong auctions of U.S. government 2-year

and 5-year bonds

on Tuesday and Wednesday respectively, evidence that the market is relaxed with Treasury yields at the lower levels.

Traders doubtless will be eager to see if the good run continues at 1 p.m. Eastern when the Treasury looks to sell $40 billion of 7-year notes
.

Amid the optimism, some strategists are wondering whether investors may have jumped the gun by pricing in so many rate cuts next year. Some fear this could mean stocks are due for a pullback should expectations shift again.

“If global equity markets have one Achilles’ heel going into January 2024, it is the expectation that the Fed will be methodically and consistently cutting interest rates throughout the year,” said Nicholas Colas, co-founder of DataTrek Research.

As for U.S. economic data released Thursday, investors focused on a weekly jobless claims report which showed the number of Americans applying for benefits had risen for a second straight week. Initial jobless claims rose by 12,000 to 218,000 in the week ended Dec. 23, according to Labor Department data.

A report on the U.S. trade deficit in goods showed it had widened 0.8% to $90.3 billion in November, according to an advanced estimate from the Commerce Department.

Finally, pending home sales data showed sales were flat in November compared with the previous month.

Companies in focus

• Mullen Automotive Inc.
  MULN
  stock rallied as the electric vehicle maker said it invoiced Randy Marion Automotive Group $1.7 million for delivering another 50 cargo vans.

• Apple Inc.
  AAPL
  shares traded higher after the company scored a legal victory allowing it to, at least temporarily, continue selling its latest Apple Watch models.

• Chinese ecommerce giant Alibaba Group Holding
  BABA
  was up despite a judge in New York ruling that the company must face a lawsuit by a U.S. toymaker.