Updated at 4:15 pm EST
Stocks finished higher Monday as investors treaded cautiously into the final full trading week of the year focused on the Federal Reserve‘s pending rate decision and renewed concerns for recession in the world’s biggest economy.
Investors will navigate a host of key data releases this week, including a Commerce Department estimate of consumer price inflation Tuesday, as they head towards the holiday-shortened trading period to close out what has been a difficult year for U.S. stocks, with the S&P 500 down 17.5% and the Nasdaq Composite down nearly 30%.
Friday’s hotter-than-expected producer price inflation data continues to linger within markets, as well, with analysts worried the factory gate pressures will work their way into consumer prices, a move that could consolidate the Fed’s hawkish signaling on rates heading into the start of next year.
At the same time, Treasury bond yields continue to flash recession warnings, with benchmark 10-year Treasury note yields easing modestly to 3.543% head of today’s $32 billion auction, a level that is around 79 basis points south of 2-year notes.
According to a study from the San Francisco Federal Reserve, a sustained inverted yield curve has preceded all of the nine recessions the U.S. economy has suffered since 1955, making it an extremely accurate barometer of financial markets sentiment.
The Fed decision Wednesday will be preceded by what is likely to be a closely-tracked November inflation reading from the Commerce Department on Tuesday, with analysts looking for a modestly easing in both headline and core inflation pressures. Retail sales data for November will follow on Friday.
Both the Bank of England and the European Central Bank are likely to confirm expected rate hikes of 50 basis points on Thursday, taking their benchmark borrowing rates to 3.5% and 2.5% respectively, as policymakers in major economies around the world continue to grapple with surging inflation and slowing economic growth.
The S&P 500 finished 1.43% higher, while the Dow Jones Industrial Average gained 528 points, or 1.58%, to 34,004. The tech-heavy Nasdaq ended up 1.26%.
Horizon Therapeutics (HZNP) – Get Free Report shares surged 15.5% after the drugmaker agreed agreed to a $28.5 billion takeover by Amgen AMGN, one of three end-of-year deals — including Thoma Bravo’s $81 bid for Coupa Software (COUP) – Get Free Report and BDT’s $3.7 billion purchase of grill-maker Weber (WEBR) – Get Free Report — that gave a muted 2022 M&A tally a modest boost.
Boeing (BA) – Get Free Report shares were marked 3.7% following weekend reports that suggest the planemaker is close to agreeing a massive aircraft deal with Air India.
Microsoft (MSFT) – Get Free Report shares rose 2.9% after the world’s second-largest tech company said it would take a 4% stake in the London Stock Exchange as part of a deal to move its data platform into its cloud computing structure.
Overnight in Asia, stocks were on the back foot following both Friday’s sell-off on Wall Street and concerns that the loosening of China’s Covid restrictions would trigger a wave of new infections in the world’s second-largest economy.
In Europe, surging power prices heading into a week-long cold snap rekindled worries of a near-term slowdown, pulling the region-wide Stoxx 600 ending 0.5% lower in Frankfurt trading.
Global oil prices moved higher heading into the New York session, as traders weighed the prospect of weaker China demand against supply concerns linked to the ongoing shutdown of the Keystone Pipeline connecting Canadian drillers to the U.S. Gulf.
Brent crude contracts for February delivery, the global benchmark, rose $2.18 to $78.28 per barrel while WTI contracts for January were marked $2.44 higher at $73.46 per barrel.