The Dow Nailed 40,000. What a Week.
Stocks had another winning week. The big deal: The Dow closed above 40,000.
The industrials briefly hit the key number on Thursday, then backed off. In March 1999, the index hit the 10,000-point mark seven times on an intraday basis before eventually closing above that level.
The outlook for inflation and, consequently, interest rates drove Wall Street’s optimism. Now, the big deal: Can the market bottle all that positivity?
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The Dow closed above 40,000, passing a long-anticipated benchmark in the last minutes of trading.
The index ended the day up 0.3% to close at 40,004.35, while the S&P 500 gained 0.1% after wavering through the session. The tech-heavy Nasdaq Composite was down 0.1%.
Other than a late surge in the Dow, it was an uneventful session. Investors digested commentary from Fed governors, including Michelle Bowman, who said she would be willing to raise interest rates.
But the communication didn’t significantly change the bank’s recent messaging on policy. The stance is clear: No rate hikes are on the cards, and there will be no cuts until there is a sustained move lower in inflation, or unless the economy suddenly worsens.
The Dow marked five straight weeks of gains, while the S&P 500 and Nasdaq have risen for four weeks. It was the Dow’s longest winning streak since February.
The Dow, the oldest of the three indexes, has taken the bull run that started in October 2022 to new heights, highlighting a wave of optimism among investors. This week’s inflation numbers, together with continued strength in the economy, played a significant role.
The consumer price index for April showed that price gains cooled from the month prior, allaying fear that last year’s progress in reining in inflation was petering out. At the same, the recession that many market watchers were expecting last year has not arrived, regardless of higher interest rates. Employment remains healthy.
“If the Goldilocks scenario continues to play out, of moderating inflation and slightly higher, but acceptable, labor market weakness, we believe this sets the stage for a move to 42,500 for the DJIA by the end of this year,” wrote Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
Attention now turns to first-quarter earnings from Nvidia, which come out on Wednesday. The company has dominated the market for AI-related chips and what management has to say about the outlook will be an important indicator about the health of the chip market.
Stocks were edging higher into the close, with the Dow nearing the the 40,000 milestone yet again.
The Dow was up 113.36 points, or 0.3%, after marking a small loss earlier. The S&P 500 was up 0.1% after wavering throughout the day. The tech-heavy Nasdaq was down 0.1%.
All three indexes are set to mark their longest weekly winning streak in three months
Some tough words were spoken at a convention by Federal Reserve voting member Michelle Bowman on Friday.
In prepared remarks at the Pennsylvania Bankers Association 2024 Convention, Bowman said that she remains “willing to raise the target range for the federal funds rate at a future meeting” if the coming data shows that progress on inflation has stalled or reversed.
“After seeing considerable progress on slowing inflation last year, we have not yet seen further progress this year,” she said. Recent consumer price index data showed that price gains in April moderated slightly versus the prior month.
The market barely reacted to the speech; the S&P 500 went from flat to down 0.2%