Dow hits milestone 40,000 mark as rate-cut hopes fuel rally

All the indexes started out with a bang this morning, the Dow scaling almost 150 points and hitting the 40,000-mark around 11 a.m., then the whole market took a dive for the rest of the day with all three closing modestly in the red. Even though most of the day was in a decline, investors focused on the morning rally which still kept up hopes that inflation was on a downward path. 

The odds of a September cut now stand at 70% and, while earlier in the year there was the expectation of up to six cuts this year, that has now been reduced to one or two and the market seems to have found peace with that. It helped that jobless claims this week fell, also an encouraging sign that the anti-inflation measures are not hurting the employment market.  Volume was again through the roof today with an astounding 17.6 billion shares traded. 

Dow hits milestone 40,000 mark as rate-cut hopes fuel rally

By Chibuike Oguh and Bansari Mayur Kamdar

Thu May 16, 2024 4:01 PM

DJ: 39,908.00  +349.89        NAS: 16,742.39  +231.21       S&P: 5,308.15  +61.47     5/15

DJ: 39,869.38  -38.62           NAS: 16,698.32  -44.07          S&P: 5,297.10  -11.05      5/16

NEW YORK, May 16 (Reuters) - The Dow (.DJI), opens new tab reached an all-time high of 40,000 for the first time on Thursday, as investor hopes of interest-rate cuts by the Federal Reserve were buoyed by data showing inflation slowdown, as well as strong corporate earnings results.  The blue-chip index has recovered from its October 2022 lows, powered by resilient U.S. economic growth despite steep rate hikes by the Fed.

"The current environment seems to focused on what the Fed may or may not do, given that we had started the year with the expectation that the Fed will cut rates up to six times but that moved down more recently to one or two times," said Silas Myers, chief executive and portfolio manager at Mar Vista Investment Partners in Los Angeles.  Investors are betting on two quarter-point interest rate cuts from the Federal Reserve this year, and estimate a 70% chance of the first reduction in September, according to the CME FedWatch Tool.

All three Wall Street indexes had reached record closes on Wednesday after data showed a smaller-than-expected rise in consumer prices in April, indicating that inflation had resumed its downward trend.  Data on Thursday also showed the number of Americans filing new claims for jobless benefits fell last week, though labor market conditions remain fairly tight even as job growth is cooling.  "The more information you get out there shows there's slowing inflation and yet employment is holding up, this has really put a floor or even ignited this rally that we've seen in the past couple of days," Myers added.

The Dow Jones Industrial Average (.DJI), opens new tab fell 38.62 points, or 0.10%, to 39,869.38, the S&P 500 (.SPX), opens new tab lost 11.05 points, or 0.21%, to 5,297.10 and the Nasdaq Composite (.IXIC), opens new tab lost 44.07 points, or 0.26%, to 16,698.32.

Walmart (WMT.N), opens new tab rose after the retail giant raised its fiscal 2025 sales and profit forecast, betting on easing inflation to further boost demand for essentials.  Deere (DE.N), opens new tab dropped after the farm equipment maker trimmed its annual profit forecast for the second time.  U.S.-listed shares of Swiss insurer Chubb gained after Warren Buffett's Berkshire Hathaway (BRKa.N), opens new tab revealed a $6.7 billion stake in the company.  GameStop (GME.N), opens new tab and AMC Entertainment (AMC.N), opens new tab slid, with the so-called "meme stocks" extending Wednesday's losses following a two-day rally sparked by the social media return of "Roaring Kitty" Keith Gill. 

About 17.6 billion shares changed hands across U.S. exchanges, compared with the average of about 11.5 billion shares over the last 20 sessions.

Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE. On the Nasdaq, 1,965 stocks rose and 2,301 fell as declining issues outnumbered advancers by a 1.17-to-1 ratio.  The S&P 500 posted 64 new 52-week highs and one new low while the Nasdaq recorded 188 new highs and 58 new lows.