Wall Street ventured into unprecedented territory Thursday, with the Dow Jones Industrial Average breaking above 40,000 for the first time after Walmart's stunning earnings report shined a bright light on the U.S. economy.
“The bigger message from achieving one of these milestones is that American companies are in pretty good shape,” said Art Hogan, managing director and chief market strategist at B. Riley Financial. That's what I mean.'' “It's like getting a gold star in school. Oh well, it's okay.”
Investors are expecting a “soft landing”
Ryan Detrick, chief market strategist at Carson Group, said stocks continue to rise even as the U.S. appears to be headed toward a so-called “crisis.” soft landing In this case, inflation will recede to more normal levels and economic growth will remain healthy. Although consumer spending and employment growth have slowed, they remain strong enough to stave off a prolonged recession, even as the Federal Reserve moves back on its timeline for cutting benchmark interest rates.
“Think about how many people have been talking about a recession and a bear market over the last year. Now we're back to new highs,” he said. “Investors who were patient and ignored all the scary headlines were rewarded once again, just as they have been throughout history.”
The Dow Jones Industrial Average recently rose 83 points, or 0.2%, to 39,990, rising 6% after Walmart reported strong first-quarter results, setting a historic record. The retail giant reported strong e-commerce sales growth and increased uptake among higher-income shoppers.
“This is not an inflation-driven performance,” Walmart CEO Doug McMillon told analysts on an earnings call.
The S&P 500 and Nasdaq Composite also rose to record highs before evening out their gains, each gaining less than 2%.
Despite expectations that the Federal Reserve would cut interest rates five or six times this year, expectations for five or six interest rate cuts this year have receded, and corporate profits have been supported by a slowly cooling but still solid economy.The probability of a September interest rate cut has increased slightly following data released on Wednesday. Consumer prices will moderate slightly in April.
“Re-establishing a disinflationary trend in the coming months should allow the Fed to begin easing policy in September,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. The Fed still expects to cut interest rates by a total of 50 basis points this year. Year.
Interest rate cuts are expected as inflation improves “dramatically” in the second half of 2024, said Carson Group's Detrick. “This is an election year, so some turbulence is expected, but overall the bull market that started in October 2022 is still alive and well.”
From Hogan's perspective, as long as the economy is doing well and continues to boost corporate profits, investors can get by without multiple rate cuts. In his words, “We're in a better position if we don't need the Fed's help.”
