Federal Reserve Chair Jerome Powell gave no indication the central bank has reached the end of interest rate hikes in Friday's speech, but market participants reacted as if he did. Indeed, the main indexes were mostly lower to start the day, but swung higher after Powell took the mic.
Speaking at Spelman College in Atlanta, the head of the central bank said it is "premature" to say with certainty that the Fed has "achieved a sufficiently restrictive stance" or to speculate on rate cuts. Powell added that while recent lower inflation readings – including October's Consumer Price Index (CPI) – "are welcome," the Fed's ultimate goal is to reach the 2% target.
Still, this morning's data from S&P Global and the Institute for Supply Management (ISM) showed manufacturing activity remained in contraction territory in November. The bad-news-is-good news readings had market participants thinking the economy has cooled to the point where no more rate hikes are needed.
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According to CME Group, futures traders are pricing in expectations the federal funds rate will remain at its current range of 5.25% to 5.5% through May, when there is a 42% chance for a rate cut – up from 8% one week ago.
Disney reinstates dividend after three-year hiatus
In single-stock news, Walt Disney (DIS) made waves after the entertainment and media giant reinstated its dividend after suspending the payout at the start of the COVID-19 pandemic.
Additionally, amid reports that activist investor Nelson Peltz is seeking seats on Disney's board of directors, the company said it has added Morgan Stanley (MS) CEO James Gorman and former head of Sky TV Jeremy Darroch to its board.
While Gorman and Darroch "represent an improvement from the status quo, the addition of these directors will not, in our view, restore investor confidence or address the root cause behind the significant value destruction and missteps that this Board has overseen," said Trian Fund Management, Peltz's investment management firm, in a statement. "Trian intends to take our case for change directly to shareholders."
The Dow Jones stock slipped 0.2% today.
Ulta stock glows after earnings
Elsewhere, Ulta Beauty (ULTA) gained 10.8% after the cosmetics retailer reported earnings. In its third quarter, Ulta reported higher-than-expected earnings of $5.07 per share on $2.49 billion in revenue. The company also raised the low-end of its full-year forecast.
Ulta's results were "solid," says Stifel analyst Mark Astrachan (Hold), particularly in the face of slowing consumer spending and macroeconomic volatility. "We think the result indicates the U.S. beauty market remains relatively resilient relative to other consumer categories," Astrachan notes, adding that from a stock standpoint, "Ulta deserves a premium multiple to peers."
As for the major indexes, the Dow Jones Industrial Average rose 0.8% to 36,245, the S&P 500 added 0.6% to 4,594, and the Nasdaq Composite was 0.6% higher at 14,305.
It was the fifth straight weekly win for the main benchmarks. This is the longest weekly win streak for the Dow since 2021.
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