The Dow Jones Industrial Average hit a new record high on Friday, reaching 40,092.44 points and surpassing its previous peak set in late May. This milestone comes as investors show renewed interest in stocks that have lagged behind this year, driven by optimism about potential Federal Reserve interest rate cuts.
The broader market also saw gains, with the S&P 500 up 0.9% and the Nasdaq advancing 1.1%. Ryan Detrick, chief market strategist at Carson Group, noted the positive trend: “That rotation into small- and mid-caps is still continuing and that’s a positive sign overall.”
However, the day’s gains weren’t uniform across all sectors. Major banks reported mixed results, leading to some stock price declines. JPMorgan Chase saw its second-quarter profit rise due to increased investment banking fees, but its shares dipped slightly. Wells Fargo and Citigroup also experienced share price drops despite some positive earnings news.
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The market’s optimism stems partly from recent economic data. While June’s producer prices were slightly higher than expected, this didn’t significantly alter expectations for a Federal Reserve rate cut. In fact, traders now see a 94.4% chance of a rate reduction by September, up from 77.7% just a week ago.
Detrick explained the market sentiment stating, “We think the rotation into the underloved, underappreciated, underperforming small- and mid-caps could take the baton in the second half of this year, as the Fed is clearly more dovish than they’ve been.”
As earnings season kicks off, investors are hoping to see strong profit growth beyond just the tech giants that have dominated market gains. Analysts project second-quarter earnings for S&P 500 companies to grow by 9.6%, a significant improvement from the 2.8% decline seen in the same period last year.
The day also saw mixed performance among large tech companies. Apple shares rose 1.9%, while Meta Platforms fell 1.3%. Tesla rebounded with a 3.5% gain after a sharp decline the previous day following news of a delay in its robotaxi launch.
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As the week came to a close, all three major indexes were poised for gains, with the Dow on track for its best week in over two months. This broad-based rally suggests growing investor confidence in the market’s ability to maintain its upward trajectory.
