On Thursday, the Nasdaq Composite achieved a historic milestone by closing at a record high for the first time since 2021, marking the end of a streak of 569 trading days without reaching a new high. The tech-heavy index surged 0.9%, while the S&P 500 also hit a fresh record with a 0.5% gain, and the Dow Jones Industrial Average rose by 0.1%, or 45 points.
January and February witnessed the strongest start to a year for the Dow and S&P 500 since 2019, with the Nasdaq gaining 7.2% year-to-date.
Despite fresh economic data released on Thursday, which showed the personal-consumption expenditures price index rising 0.3% from December in line with expectations, the prevailing sentiment remains unchanged regarding policymakers’ ability to address inflation without causing an economic slowdown.
Traders in interest-rate derivatives are now indicating a 21% probability of the Federal Reserve cutting interest rates at its May policy meeting, slightly up from around 19% prior to Thursday’s inflation data, according to the CME FedWatch Tool.
While a series of robust economic indicators portraying a strong economy and labor market have led investors to temper their forecasts of potential interest rate cuts, many still anticipate the central bank to implement rate reductions this year. Such expectations are likely to bolster risky assets like stocks.
According to Jay Hatfield, CEO of Infrastructure Capital Advisors, the prevailing sentiment suggests that central banks worldwide, including the Federal Reserve, are likely to implement rate cuts. This perspective prompts investors to consider whether to adopt a long or short position in the index.
Inflation in Germany experienced a consecutive decline for the second month in February, indicating a potential easing of price pressures in the region.
U.S. bond yields decreased as bond prices rose, with the 10-year Treasury yield settling at 4.251%, down from 4.273% on Wednesday.
Benchmark U.S. crude oil prices dipped by 0.4%, closing at $78.26 per barrel.
Despite the ongoing rally in stocks since the beginning of the year, investor confidence remains tempered by lingering concerns. Julie Biel, chief market strategist at Kayne Anderson Rudnick, highlighted the narrowness of the market concerning earnings growth. Many companies are cautious in providing robust guidance during conference calls this quarter.
As the fourth-quarter earnings season nears its conclusion, S&P 500 members have reported a 3.9% growth in profits, primarily driven by a select few companies. The index currently trades at 20.5 times forward earnings projections, up from 19.6 times at the start of the year, according to FactSet.
In individual stock movements, Hormel Foods saw a 14% increase after surpassing Wall Street’s earnings expectations, while Advanced Micro Devices climbed 9.1%, achieving a market value exceeding $300 billion for the first time on record. Conversely, Chemours stock plummeted by 31% following the placement of top executives on leave and a delay in its audited financial filings.
Bitcoin experienced a 2.9% increase, reaching $62,073.