Stocks kicked off the start of a big next couple of days of economic news with a merger Monday.
Market participants entered the week on a cautious note, as the next two days could give them clues as to when the Federal Reserve might first start cutting interest rates in 2024. A data-dependent central bank will certainly take tomorrow's CPI Report – a reading on consumer inflation – at least partially into account as it formulates policy.
The Federal Reserve Bank of Cleveland's Nowcast predicts headline inflation in November to increase by 3.1%, down from the 3.2% rate seen in the October CPI report. On a monthly basis, November inflation is forecast to rise 0.05%, or up slightly from an unchanged reading the prior month.
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November's core CPI, which excludes volatile food and energy prices, is expected to increase 4.1% annually and 0.3% on a monthly basis. October's core CPI rose 4.0% year-over-year and 0.2% on a monthly basis.
Speaking of monetary policy, the next Fed meeting wraps up Wednesday. The Fed's rate-setting committee, the Federal Open Market Committee (FOMC), is almost certainly going to keep the short-term federal funds rate unchanged at a 22-year high.
What market participants are really looking for are clues as to when the FOMC will pivot to rate cuts. Interest rate traders currently assign a 40% probability to a quarter-point rate cut in March 2024, according to CME Group's FedWatch Tool.
On Sunday, Goldman Sachs said it expects the Fed to begin cutting rates in the third quarter of 2024.
Macy's pops on buyout bid
Equities also got a kick out of some good old fashioned mergers and acquisitions news.
Occidental Petroleum (OXY), which is one the largest holdings in Warren Buffett's Berkshire Hathaway stock portfolio, continued the theme of consolidation in the oil patch on Monday.
OXY bought closely held U.S. shale oil producer CrownRock in a cash-and-stock deal valued at $12 billion including debt. The move comes amid a spate of energy sector deals, including Exxon Mobil's (XOM) $60 billion bid for Pioneer Natural Resources (PXD) and Hess's acquisition by Chevron (CVX), a Dow Jones stock, for $53 billion.
In more consumer-facing M&A news, shares in Macy's (M) closed up 19% after The Wall Street Journal reported a group of investors offered $5.8 billion to buy out the iconic department store operator. The group intends to take Macy's private.
As for the major indexes, the Dow Jones Industrial Average added 0.4% to 36,404, the S&P 500 rose 0.4% to 4,622, and the Nasdaq Composite gained 0.2% to 14,432.
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