US Stocks Notch Record Highs on Easing Inflation Worries

Wall Street capped off a strong week, with all three major indexes reaching new all-time highs. The Nasdaq 100 surged 2.16%, closing near its peak and boasting a 34.25% gain over the past 52 weeks. Similarly, the S&P 500 climbed 1.65%, also nearing record levels, and has risen 26.80% in the previous year. The Dow Jones Industrial Average advanced 1.3%, crossing the significant 40,000 mark for the first time and up 20.31% over the last 52 weeks. The excellent gains were fueled by positive economic data and a shift in investor sentiment.

Fresh signs of a cooling economy, particularly a better-than-expected inflation report, calmed investor worries and boosted optimism for a “soft landing.” Despite some Fed officials expressing caution, slowing inflation and economic activity have bolstered expectations for a more dovish monetary stance. The CME FedWatch Tool indicates a 68% probability of a rate cut in September.

Strong corporate earnings also played a role in the market’s momentum. Sector-wise, energy led the gains while technology lagged. Notably, the S&P 500’s energy sector saw significant advances, underscoring a broader market rally beyond just the tech-heavy Nasdaq. Corporate events such as Nvidia’s upcoming earnings report and the Microsoft Build event are expected to be closely watched this week.

While the outlook appears positive, some uncertainties remain. The Fed hasn’t explicitly signalled a change in its stance on rate cuts, and lofty valuations in some sectors could pose a risk. Overall, the US stock market is enjoying a bullish run, but it’s important to stay attuned to upcoming data and economic developments.

Sources:TradingView, Trading Economics, Reuters, Dow Jones Newswire.

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst

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