Wall Street was on a roll Tuesday as the Dow and S&P 500 closed at record highs, fueled by investor optimism that borrowing rates might drop come September.
The Dow jumped 743 points, or 1.9%, marking its highest closing ever and the best daily percentage gain since June 2023. The S&P 500 rose 0.6% to a record, while the Nasdaq inched up 0.2%.
Driving this surge was a mix of strong business earnings and an unexpected boost in consumer spending.
The Commerce Department reported that US retail sales in June exceeded expectations after a sluggish first half of the year. These figures were seasonally adjusted but not inflation-adjusted.
This resilience has investors hopeful that the Federal Reserve will cut rates in September. According to the CME FedWatch Tool, Wall Street now sees a 100% chance of a rate cut then.
Gold futures also hit a record, settling around $2462 per troy ounce on Tuesday.
Last week’s encouraging inflation data had already buoyed hopes for a rate cut. Ron Temple, Lazard’s chief market strategist, asserted in a Thursday note, “A September rate cut should be a done deal at this point.”
BNP Paribas economists updated their forecast last Thursday, now expecting a rate cut in September, driven by June’s inflation and jobs data. They anticipate two quarter-point cuts in 2024.
The market’s optimism is palpable, with investors betting on a more favorable borrowing environment soon.
As the summer heat continues, Wall Street’s momentum seems unstoppable, much like a train gaining speed down the track.
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