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Dow closes above 40,000 for first time, reaching new milestone
The Dow closed above 40,000 points for the first time on Friday, on a quiet day on Wall Street as investors took heart from strong corporate earnings and signs that inflation is cooling.
The Dow Jones Industrial Average, launched in 1896, tracks the stocks of 30 large “blue-chip” companies, generally considered low-risk investments. Companies listed on the index include Apple, Intel and Microsoft among technology players, while the financial sector is represented by companies such as American Express, Goldman Sachs and JPMorgan Chase. Dow healthcare companies include Amgen, Johnson & Johnson, Merck and UnitedHealth Group.
The Dow surpassed the 30,000-point mark in November 2020. However, while the 128-year-old index is still widely followed, institutional investors generally focus on broader stock market barometers such as the S&P 500 and Nasdaq , with a strong technological weight.
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The Dow added 134 points, an increase of 0.3%, closing at an all-time high of 40,004. The S&P 500 index rose 0.1% and the Nasdaq ended essentially flat. All three financial markets reached new highs this week after the Consumer Price Index rose to a annual rate of 3.4% in April, in line with analysts’ forecasts.
The Dow is up nearly 20% over the past 12 months, while the S&P 500 is up 27.5%.
Soft landing ahead?
Although inflation remains considerably higher than the Federal Reserve’s 2% target, the latest CPI data suggests that US prices are moderating, after rising much faster than expected earlier this year. This is reviving hopes that the Federal Reserve may soon move to lower its benchmark interest rate, which would give a boost to financial markets as well as reduce borrowing costs for consumers and businesses.
With the US economy seemingly on track for a soft landing, many investors expect the US central bank to cut the federal funds rate – now at its highest level in more than two decades – twice this year. Still, analysts said the Fed will wait for more evidence that inflation is receding before easing policy.
“It’s clear that the Fed will not wait for inflation to fall back to 2% before it starts cutting rates,” Bob Schwartz, senior economist at Oxford Economics, said in a note to investors. “At this point, it would likely be too late to prevent the economy from slipping into recession. But it is taking longer than usual for the Fed’s rate hikes in 2022 and 2023 to bring inflation under control, and it will take several months of benign inflation “. reports to inspire confidence that the trend towards 2% is firmly established.”
What does the Dow’s 40,000 milestone say about the economy?
Although major markets continued to levitate, so-called meme stocks are failing after soaring earlier in the week. Shares of GameStop, a loss-making video game retailer that has been embraced by retail investors, fell nearly 20% on Friday after the company said it expects to report a three-month loss of $27 million to $37 million. until May 4th. also said it could sell up to 45 million shares to raise cash.
Shares hit $64 on Tuesday after Keith Gill, a popular online trader known on social media as “Roaring Kitty,” resurfaced on X (formerly Twitter) after a three-year hiatus.
—The Associated Press contributed to this report.