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Dow Jones stock index hits key milestone for first time in big boost for the US economy and 401(K)s
The Dow Jones Industrial Average hit a key milestone - and record-high - on Thursday amidst hope the Federal Reserve will start cutting interest rates soon.
The benchmark index breached the 40,000-point threshold for the first time ever, surpassing a previous record set on Wednesday. The other two major indices - the S&P 500 and the Nasdaq - are also at or near record highs.
It marks a welcome boost for economists after two years of uncertainty sparked by red-hot inflation and rising interest rates.
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said: '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.'
Most Americans have at least some of their 401(K) and Individual Retirement Account invested in the Dow Jones, the S&P 500 and the Nasdaq.
The Dow Jones Industrial Average breached the 40,000-point threshold for the first day ever, surpassing a previous record set on Wednesday
Down Jones hitting 40,000 marks a welcome boost for economists after two years of uncertainty sparked by red-hot inflation and rising interest rates. Photo shows traders work on the floor of the New York Stock Exchange (NYSE) on May 16, 2024
US stock markets have climbed since the start of the year, as investors bet on an AI-led rally, robust earnings and hopes that the Federal Reserve will ease its tightening cycle.
Yesterday, the market responded positively to the news that inflation cooled slightly in April to 3.4 pecent from 3.5 percent in March. Slowing of price rises sparked hope the Fed will begin cutting interest rates in September.
All three major US indexes - including the Dow, S&P 500 and Nasdaq - hit fresh intraday record highs as a result on Wednesday.
Inflation must cool in order for the Fed to cut interest rates, which are currently at a 23-year-high of between 5.25 and 5.5 percent.
Higher rates are intended to reign in consumer spending by lowering demand thereby causing prices to fall.
Officials has a clear target of bringing the annual rate of inflation to 2 percent.
At the start of 2024, economists had predicted officials would slash rates up to four times throughout the year.
But consistently hotter-than-expected inflation readings have thrown that plan into doubt.
Some 96.9 percent of investors now anticipate the Fed will keep rates unchanged during their next meeting on June 12, according to the CME FedWatch Tool.
But around three-quarters expect rates will be cut by the body's September 18 meeting - if not earlier.
Investors responded positively to the news that inflation cooled slightly from 3.5 percent in March - sparking hope the Federal Reserve will begin cutting interest rates in September.
The Federal Reserve has voted to hold interest rates steady at their current 23-year-high, officials announced today
Of the 30 companies on the Dow, card company American Express and retail giant Amazon.com are among the biggest percentage gainers so far this year, up 29 percent and 22 percent respectively.
For the Dow, the journey to 40,000 from the 30,000-mark took a little more than three years, a faster climb than the previous 10,000-point clamber, at less than four years.
It took nearly two decades for it to move from the 10,000-mark to 20,000. The index, which dates to 1896, first touched 10,000 in March 1999.