Stock Market Today: Stocks higher as markets bet on first quarter Fed rate cuts

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U.S. equity futures moved higher Wednesday, while Treasury yields and the dollar tested multi-month lows, as investors begin to accelerate bets on a Federal Reserve rate cut into early next year.

Updated at 8:37 AM EST

Worst. Recession. Ever.

The U.S. economy grew at a 5.2% pace over the three months ending in October, the Commerce Department said in its second look at third quarter GDP, up from its initial estimate of 4.9% and the best pace of growth since late 2021.

Third quarter inflation, meanwhile, was revised lower, with the PCE index estimated to have risen 3.4%, down from a prior estimate of 3.6%, suggesting the economy is carrying a more productive momentum into the final three months of the year.

Even hotter: real GDP expanded by +5.2% (q/q ann.) in 3Q23, up from initial estimate of +4.9% … personal consumption revised lower while business investment revised higher pic.twitter.com/Bn6tfoOjt5— Liz Ann Sonders (@LizAnnSonders) November 29, 2023

Updated at 8:26 AM EST

Bonds Away!

Treasury yields continue to move lower in early trading, with 2-year notes last pegged at 4.674%, down 6 basis points from last night's closing levels and more than 37 basis points south of their end-October close.

Benchmark 10-year notes, meanwhile, were holding below the 4.3% mark, at 4.297%, extending their November decline to around 28 basis points.

Updated at 7:01 AM EST

GM pays strikes, now shareholders

General Motors  (GM) - Get Free Report shares are surging in pre-market trading after the carmaker reinstated its 2023 profit guidance following the six-week UAW strike, adding it would boost its quarterly dividend and buyback around $10 billion in stock.

GM shares were last marked 7.6% higher and expected to open at $31.30 each. 

Related: General Motors surges on dividend boost, $10 billion buyback, new profit outlook

Fed Governor Christopher Waller, speaking at the American Enterprise institute yesterday in Washington, indicated that the Fed could both deliver a 'soft landing' for the world's biggest economy and begin cutting rates as early as the first quarter of next year if inflation continues to moderate at its current pace "for three months, four months, five months."

 "It has nothing to do with trying to save the economy. It is consistent with every policy rule. There is no reason to say we will keep it really high," Waller said.

The change in tone from Waller, previously considered one of the more hawkish members of the Fed's rate-setting committee, triggered a sharp rally in Treasury bonds that pulled benchmark 10-year note yields below 4.3% for the first since since mid-September.

The CME Group's FedWatch is also pricing in a 40.6% chance the Fed will lower its benchmark lending rate by 25 basis points in March, with the odds of a cut in May pegged at 50.1%. A June cut is fully price-in, according to FedWatch data.

Bill Ackman, the billionaire investor who runs Pershing Square Capital, told Bloomberg he expects the Fed to move in the first quarter.

“I think there’s a real risk of a hard landing if the Fed doesn’t start cutting rates pretty soon,” he said.

The Commerce Department will publish its latest estimate on third quarter GDP growth at 8:30 am eastern time, with analysts looking for a modest boost to the current 4.9% assessment.

The Atlanta Fed's GDPNow forecasting tool, meanwhile, pegs current quarter growth at 2.1%, up modestly from the 2% advance it calculated earlier this month.

The Fed will also publish its 'Beige Book' of economic activity around the region over the month of November at 2:00 pm eastern time.

The Fed's preferred inflation gauge, the core PCE price index, will be published at 8:30 am eastern time Thursday, followed by a Friday speech from Fed Chair Jerome Powell at at Spelman College in Atlanta. 

With Treasury yields and the dollar moving lower, stocks are set for a solid set of opening bell gains Wednesday as futures contracts tied to the S&P 500 are indicating a 22 point advance. 

Contracts tied to the Dow Jones Industrial Average, meanwhile, suggest a 134 point gain while those linked to the Nasdaq are priced for a 105 point advance. 

In overseas markets, Europe's Stoxx 600 was marked 0.48% higher in early Frankfurt trading, while the FTSE 100 slipped 0.1% as the pound climbed to 1.2681 against the weakened greenback.

Overnight in Asia, the region-wide MCSI ex-Japan index slipped 0.26% into the close of trading, while the Nikkei 225 fell 0.26% in Tokyo. 

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