US Stocks End Best Week in Five Near Record Highs
Major indices are buoyed by investor optimism for the Federal Reserve's first interest rate cut of the year at its upcoming meeting.
Major US stock indices finished their best week in five near record levels, driven by strong investor optimism for the Federal Reserve's first interest rate cut of the year at its upcoming meeting. Recent economic data showing a cooling but not recessionary job market, along with contained inflation, has solidified expectations for a policy shift.
The S&P 500, after a week of strong gains, is hovering just below its all-time high. The tech-heavy Nasdaq Composite has been on a tear, , and the Dow Jones Industrial Average has also been flirting with record territory. This bullish sentiment comes as the market is pricing in a greater than 90% chance of a rate cut at the Fed's September meeting.
Investors have been eagerly awaiting a pivot from the central bank after a period of monetary tightening to combat inflation. While inflation remains a concern, recent data suggests it is moderating, giving the Fed more room to ease policy. The latest jobs report, which showed a slowdown in hiring but still healthy wage growth, has been a key driver of this optimism. A cooling labor market, without a sharp rise in unemployment, is seen as a 'goldilocks' scenario for the market - not too hot to fuel inflation, but not too cold to signal a recession.
"The market is clearly looking past any near-term economic weakness and focusing on the prospect of lower rates," said one analyst. "The Fed has been telegraphing a dovish pivot for some time, and now it seems we are on the cusp of it."
This week's gains cap a strong month for US equities, with the major indices posting their best weekly performance in over a month. The , and the market's upward momentum is expected to continue as long as the economic data remains supportive and the Fed delivers on its anticipated rate cut. However, some strategists caution that the market may be getting ahead of itself, and that any disappointment from the Fed could lead to a sharp pullback. For now, though, the bulls are firmly in control, and the path of least resistance appears to be higher.