Wall Street Today | S&P 500 Near All-Time High, While Bostic Touts Caution

U.S. stocks were maintaining their upward momentum Tuesday, with the S&P 500 index just shy of its record as investors keep cheering the chances of Federal Reserve rate cuts next year and an economy that keeps chugging.

Investors are breaking out the eggnog. While the Dow has already been turning out record closes of late, the S&P 500 index is now less than 1% away from a record close. Traders remained energized by the prospect of the Federal Reserve starting to cut interest rates by the spring of next year. More evidence of a sturdy economy is also providing a tailwind.

Richmond Fed President Barkin added some more holiday cheer with remarks Tuesday morning that there’s “good progress” in the fight against inflation. Regarding any interest-rate-cut details, Barkin said it was still too soon. If inflation keeps slowing like it is now, the central bank would "respond appropriately” by cutting interest rates, he said.

Federal Reserve Bank of Atlanta President Raphael Bostic said he doesn’t expect there will be an urgency to lower rates next year, emphasizing that the US central bank must be persistent and patient as officials assess their next policy move.

“For me, I’m thinking inflation is going to come down relatively slowly in the next six months, which means there’s not going to be urgency for us to pull off our restrictive stance,” Bostic said during a question-and-answer session at an event in Atlanta.

Treasury yields moved lower Tuesday morning after the Bank of Japan maintained its negative interest-rate policy and gave little indication of a potential shift in its ultra-loose stance soon.

Helping to suppress yields was the continued hope that easing U.S. inflation means the Federal Reserve can start cutting interest rates next year. However, several officials have tried recently to calm the market's enthusiasm for this narrative.

Also weighing on yields was Tuesday's decision by the Bank of Japan to keep interest rates at minus 0.1%, with Governor Kazuo Ueda offering little evidence during his press conference that a move to exit the central bank's ultra-loose stance is coming soon.

In early December, the Houthis declared a ban on sailing in the Red Sea and Arabian Sea for any ship heading to Israel - regardless of its nationality. Subsequently, there have been numerous incidents of ship attacks in the Red Sea.

Given the vital significance of the Suez Canal for international trade, analysts have warned that ongoing conflicts and waterway obstructions are posing fresh challenges to global supply chain security, causing disruptions across various industries including shipping and energy. The situation may even heighten the upward risk of inflation in some regions.

In the wake of escalating tensions in the Red Sea region, the shipping industry is facing unprecedented challenges that are directly impacting stock markets. Shipping giants like Maersk and ZIM recently witnessed notable stock surges as they adjusted routes due to security concerns in the Red Sea following attacks by Houthi militants.

Meanwhile, major oil players such as BP are temporarily halting transit through the Red Sea, contributing to a ripple effect on global oil prices. The potential for disruption in the vital Suez Canal route raises questions about increased transport times and the consequent impact on freight rates.