US Markets Rocket Forward, Dow Inches Closer to Uncharted Territory

US stock futures increased on Friday, as optimism over potential deeper and earlier interest rate reduction continued to drive the Dow toward a new high for the third consecutive day.

Futures for the Dow Jones Industrial Average (^DJI) increased by 0.3%, or around 100 points, following the blue-chip index's closing Thursday at a new all-time high. Futures on the tech-heavy Nasdaq 100 (^NDX) were up 0.3%, while those on the S&P 500 (GSPC) increased by 0.2%.

The Federal Reserve's unexpectedly dovish tone this week, which hinted at more rate reduction in 2024 and acknowledged the momentum of its anti-inflation drive, sent markets into a frenzy. Due in part to this, US equities have seen a record-breaking run, with the major indices posting six straight days of gains.

However, there is a chance that the bullish sentiment will wear off as some analysts warn that markets might be overexcited. Furthermore, unlike the Fed, European central banks dispelled expectations for policy easing.

On Friday, over $5 trillion worth of US stock options-80% of which are tied to the S&P 500-are scheduled to expire. According to some experts, this is the greatest such expiry in at least 20 years, which may prevent any decline.

In other news, oil continued to rise, supported by a decline in the dollar due to the Fed, and headed for its first weekly gain since October. After increasing more than 4% over the previous two days, Brent crude futures (BZ=F) moved hands at over $77 per barrel, while West Texas Intermediate (CL=F) futures were trading at almost $72 a barrel.

However, as optimism about looser regulations developed, the Dow has increased by more than 10% since the beginning of the fourth quarter.

Market Performance and Economic Indicators

The Dow's year-to-date gain reached 11.9% following the advances on Wednesday. Even greater gains have been recorded in the larger market; as of 2023, the S&P 500 is up 22.6%. As of now, the Nasdaq Composite has increased by 40.8%.

More positive inflation figures were released to the market earlier on Monday, showing that the producer price index remained stable in November. This comes after the consumer price index data on Tuesday, which indicated that prices had slowed to an annual pace of 3.1% last month.

After the Fed released its rate projection, the yield on the 10-year Treasury note, which serves as a benchmark for mortgage rates and other loans, fell to 4.03%, the lowest level since August.

The banks that stand to gain if the Fed arranges a so-called soft landing, Bank of America and Wells Fargo, saw their shares rise 4% and over 3% on Wednesday. A rebound in the housing market should help Home Depot's sales, which increased by 3%.