The Dow Jones Industrial Average surged past the 40,000 mark for the first time Thursday, driven by investor optimism that inflation pressures will ease and interest rates will decline.
The index reached a record high of 40,051, marking a significant milestone in a bull market that began in October 2022. Earlier this year, the Dow had flirted with the 40,000 level but retreated in April due to concerns over high interest rates. However, the rally regained momentum in May, bolstered by strong corporate earnings and encouraging inflation data, according to ABC News. By afternoon trading, the index had stabilized around the flatline.
Walmart's impressive performance contributed significantly to the market's rise. The retail giant's shares surged 6.4% after it reported better-than-expected quarterly profits and projected higher annual revenue. This positive outlook suggests robust consumer spending, despite ongoing inflation and rising credit card payments. Other retailers, including Target, Dollar General, and Dollar Tree, also saw their shares rise by at least 2%, anticipating favourable quarterly results, as detailed by PBS.
Insurance company Chubb also made notable gains, with its stock climbing 3.4% following Warren Buffett's Berkshire Hathaway revealing it had taken a stake in the firm, according to PBS.
Mixed economic data released Thursday tempered some of the market's optimism. Reports indicated a slight increase in unemployment claims and fewer housing starts than expected. Additionally, manufacturing growth in the mid-Atlantic region was weaker than anticipated, and import prices rose more than forecasted. Nevertheless, Treasury yields remained stable, with the 10-year yield at 4.35% and the two-year yield at 4.77%, reflecting steady expectations for Federal Reserve actions, as per PBS.
Not all stocks enjoyed gains. Deere's shares fell 2.1% despite reporting strong quarterly profits, as the company lowered its full-year profit forecast due to decreased demand for agricultural equipment. Homebuilders Lennar and D.R. Horton also saw declines of 2.1% and 1.8%, respectively, following disappointing housing start data, according to PBS.
GameStop and AMC Entertainment continued their downward trajectory, with GameStop dropping 17.5% and AMC losing 11.1%. Both stocks have been highly volatile, driven more by investor excitement than by fundamental financial changes, as detailed by PBS.
Under Armour, initially dipping, managed a slight gain after announcing a restructuring plan and a stock buyback program, despite predicting lower revenue for the upcoming fiscal year, as per PBS.
International markets showed mixed results. European indexes experienced modest declines, while Asian markets mostly rose. Hong Kong's Hang Seng jumped 1.6%, and Japan's Nikkei 225 gained 1.4% after a holiday, according to PBS.
The recent surge in the stock market has been fueled by signs of cooling inflation and the potential for interest rate cuts. Ed Yardeni, president of Yardeni Research, noted the favourable conditions, pointing to a resilient economy paired with anticipated lower interest rates as ideal for sustaining the bull market, as reported by ABC News.
