The world's largest stock market hovered near its all-time highs, with the Dow Jones Industrial Average touching the historic 40,000 mark on bets that rate cuts will keep powering Corporate America.
The oldest of Wall Street's three main stock indexes has been boosted by prospects of a resilient economy, ebbing inflation and robust corporate earnings.
It took 872 trading sessions through Wednesday for the Dow to set its latest 10,000-point milestone — or a gain of 33% — with the index recouping all of its losses from the Federal Reserve's aggressive rate hikes over the past two years, data compiled by Bloomberg show.
"Breaking the 40,000 barrier is a big psychological boost for the bulls as round numbers hold special significance in people's hearts and minds," said Chris Zaccarelli at Independent Advisor Alliance.
The S&P 500 fluctuated around 5,310. Walmart Inc. climbed on a bullish outlook as the big-box retailer attracts consumers looking for essentials and discounts. GameStop Corp. and AMC Entertainment Holdings Inc. tumbled as the meme-stock frenzy faded.
Treasury 10-year yields rose three basis points to 4.37%.
The last time the Dow Average broke a major milestone was in November 2020 — when the measure of blue chips topped 30,000 — as investors piled into risk assets amid a series of market-friendly developments that unleashed animal spirits — even as the pandemic continued to rage.
This time around, the market is defying the old Wall Street adage "sell in May and go away," with equities pushing higher after a brief pullback in April. Recent gains have been driven by softer inflation and a slew of data pointing to an only gradual slowdown of an otherwise resilient economy that's fueling corporate profits.
Analysts have ratcheted up earnings forecasts for the current quarter at the swiftest pace in two years, suggesting that the worst of the US profit slump may be firmly in the rear-view mirror, Bloomberg Intelligence data show.
"40,000 is a great milestone, but at the end of the day, there isn't much difference between 39,999 and 40,000," said Ryan Detrick at Carson Group. "Still, this is a great reminder of how far we've come. Think about how many people were talking about recessions and bear markets all of last year, now we are once again back to new highs."
Can stocks keep going?
"We think they can," Detrick said. "Earnings continue to surprise to the upside, balance sheets for Corporate America are in great shape, while the consumer might have some cracks, but is still strong thanks to a very healthy employment backdrop. Then consider lower rates are likely coming, thanks to inflation that should drastically improve in the second half of this year."
"The market is showing more and more confidence in a genuine soft landing or even no landing scenario where overall economic growth in the US continues to stay solid," said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. "It makes sense that a broader group of companies, even those that are more cyclical in areas like industrials, materials and energy can do well."
