Yesterday, the Dow Jones (US30) index achieved further gains, starting today’s Friday trading at $39,465.
Investors are hopeful for a Federal Reserve interest rate cut after initial jobless claims in the United States surged to their highest level in several months.
The Fed had previously downplayed the chances of interest rate cuts, citing insufficient progress towards its 2% inflation target and signs of recession in the US labor market.
Now, the increase in jobless claims is fueling market expectations for an imminent rather than delayed interest rate cut. Consequently, all stocks comprising the Dow Jones index rose, except for five.
Home Depot (HD) stock led the gains with a recent increase of 2.54%, while Salesforce Inc. (CRM) and IBM declined by -1.36% and -1.17% respectively yesterday.
In my view, the major US stock indices saw gains at Thursday’s close as investors absorbed a slew of earnings reports and searched for signs that the Federal Reserve might consider cutting interest rates. The Dow Jones Industrial Average led the trend, adding more than 330 points to extend its winning streak to seven consecutive sessions this morning.
The S&P 500 index added 0.5% to close above the 5200 level for the first time in a month, while the Nasdaq 100 rose by 0.3%.
I believe stocks received support this week from growing hopes that economic data will show a decrease in inflationary pressures, potentially allowing the Federal Reserve to consider interest rate cuts. However, the economic data calendar was light this week, providing few opportunities for investors to assess and price in events and data regarding the Fed’s possible future actions.
In my opinion, inflation continues to influence Federal Reserve rate cut expectations, with increasing confusion about interest rate cuts due to the resilience of the US economy. Markets are currently pricing in the first cut by a quarter point in September, with investors seeing a 71% chance of two interest rate cuts by the end of 2024. This could negatively impact the dollar’s movements and support increases in gold and US stocks, leaving prices subject to US data in the medium to long term.
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