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Dow Hits 40,000 for First Time as Bull Market Accelerates
Wall Street moved into uncharted territory on Thursday, with the Dow Jones Industrial Average surpassing 40,000 for the first time after an explosive earnings report from Walmart shed a positive light on the US economy.
“The most important message from reaching one of these milestones is that American companies are in very good shape,” said Art Hogan, managing director and chief market strategist at B. Riley Financial. “It’s like getting a gold star in school – guess what, it’s okay.”
Investors expect “soft landing”
Ryan Detrick, chief market strategist at Carson Group, noted that stocks have continued to rise as the U.S. appears headed toward a call soft landing in which inflation declines to more normal levels and economic growth remains healthy. Consumer spending and job gains, while slowing, also remain robust enough to avoid a prolonged recession, even as the Federal Reserve pushes back its schedule for cutting its benchmark interest rate.
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“Think about how many people talked about recessions and bear markets all last year – now we are once again back to new highs,” he said. “Investors who were patient and ignored all the scary headlines were once again rewarded, just as they have been throughout history.”
The Dow hit an all-time high as Walmart jumped 7% after delivering robust first-quarter results. After reaching a high of 40,051, the index fell to close at 39,869, down 38.6 points, or 0.1%, on the day. The big-box retailer reported a huge jump in e-commerce sales while also making inroads among high-income shoppers.
“These results are not driven by inflation,” Walmart CEO Doug McMillon told analysts on an earnings call.
The S&P 500 and Nasdaq Composite also rose to record levels before paring their gains, finishing 0.2% and 0.3% lower.
Analyzing the Fed’s Decision to Keep Interest Rates Stable
A slowly cooling but still resilient economy has supported corporate profits, although expectations for five or six interest rate cuts from the Fed this year have faded. Chances of a rate cut in September rose slightly after data released on Wednesday showed a slight moderation in consumer prices in April.
“The reestablishment of a disinflation trend in the coming months should allow the Fed to begin easing policy in September,” according to Solita Marcelli, investment director for the Americas at UBS Global Wealth Management, who still expects cuts of 50 basis points in the total from the Fed this year. year.
Lower rates will likely come as inflation improves “dramatically” in the second half of 2024, according to Detrick of the Carson Group. “It’s an election year, so expect some bumps, but overall the bull market that began in October 2022 is alive and well.”
From Hogan’s perspective, investors are fine with foregoing multiple rate cuts as long as the economy continues to perform well and boost corporate profits. In his words: “We’ll be better off if we don’t need the Fed to come to our rescue.”
As financial markets soared, so-called meme stocks plummeted. Shares of companies like GameStop, AMC Entertainment and Blackberry had increased earlier this week after a popular investor, known by her online handle “Roaring Kitty,” reappeared on social media after a long absence.