The S&P 500 is Expected to Open Just a Few Points Shy of Its Record High According to Stock Futures

U.S. equities exhibited modest gains on Thursday, propelling the S&P 500 within striking distance of a potential new closing high. The market dynamics unfolded as follows:

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• The S&P 500 (SPX) advanced by 9 points, or 0.2%, reaching 4,791.
• The Dow Jones Industrial Average (DJIA) saw an increase of 68 points, or 0.2%, settling at 37,723.
• The Nasdaq Composite (COMP) experienced a gain of 36 points, or 0.2%, reaching 15,135.

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The previous day witnessed the Dow Jones Industrial Average rising by 111 points (0.3%) to 37,657, the S&P 500 gaining 7 points (0.14%) to 4,782, and the Nasdaq Composite adding 25 points (0.16%) to 15,099.

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In the current market landscape, U.S. stocks commenced trading on a positive note during the penultimate session of 2023, with all three major indexes reaching noteworthy new highs. With relatively low trading volume, investors were closely monitoring whether the S&P 500 would achieve a fresh record closing high before the year's end.

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The index is currently trading approximately 20 points away from its record close of 4,796.56, set on January 3, 2022.

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"We're within [12] points [of the January 2022 closing high] here, so we'll see if we make a run either today or tomorrow," remarked JJ Kinahan, CEO of IG North America, in an interview with MarketWatch. He expressed optimism that testing the previous high seemed likely before the year concludes.

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The buoyancy in the market is attributed to hopes for a soft landing for the U.S. economy and forecasts indicating a series of interest rate cuts by the Federal Reserve in the upcoming year. Since late October, these factors have propelled stocks higher, contributing to the S&P 500's year-to-date advance of nearly 25%, according to FactSet data.

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Investors have also welcomed a significant drop in benchmark borrowing costs, with the 10-year Treasury yield falling from over 5% in October to approximately 3.8% this week.

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This week, positive sentiment received a boost from robust auctions of U.S. government 2-year and 5-year bonds on Tuesday and Wednesday, respectively. The successful auctions indicate market comfort with Treasury yields at lower levels.

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Despite the overall optimism, there is speculation among analysts about whether investors may have prematurely priced in expectations of multiple Fed interest rate cuts next year. Some analysts are concerned that this anticipation might result in a stock pullback if expectations shift.

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Regarding economic data released on Thursday, investor focus was on the weekly jobless claims report, revealing a second consecutive weekly rise in the number of Americans applying for benefits. Initial jobless claims increased by 12,000 to 218,000 in the week ending December 23, as per Labor Department data.

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Additionally, an advanced estimate from the Commerce Department highlighted a 0.8% widening of the U.S. trade deficit in goods to $90.3 billion in November. Pending home sales data showed flat sales in November compared to the previous month.