Stocks Rise with Fed's Economic Balancing Act

Stocks climbed higher on Tuesday as investors built upon the previous session's historic surge to record highs. The future success of Wall Street depends on whether the U.S. Federal Reserve can skillfully manage a gentle economic slowdown, balancing the reduction of inflation without causing a recession. Currently, traders are estimating about a 40% likelihood of a Fed rate cut in March, a significant drop from nearly 81% just a week earlier, as indicated by the FedWatch Tool.

Investors are attentively monitoring a series of economic reports scheduled for release this week. These include the fourth-quarter gross domestic product (GDP) figures on Thursday and the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index for December, due on Friday. Both reports will play a crucial role in shaping the Fed's perspective on future monetary policy.

The focus is also on the profit outlook for corporate America, following the commencement of the ongoing earnings season by major U.S. banks. So far, the results have been mixed, with several reports of lower profits.

The Nasdaq, along with other major indices, is experiencing a rise, with the Nasdaq reaching a new resistance level at the Fibonacci 0.618 retracement, where the rally continues. The performance of the 'magnificent seven' and other economic data may further propel the Nasdaq upwards.