Dow climbs to record high, hits 42,313

Record High
Record High

The stock market climbed to a fresh record on Friday as traders digested new data that pointed to further progress in lowering inflation. Wall Street also posted three straight positive weeks. The 30-stock Dow added 137.89 points, or 0.33%, ending at 42,313.00.

The blue-chip average posted a closing record and reached an all-time high during the session. The S&P 500 ticked down 0.13% to 5,738.17, while the Nasdaq Composite lost 0.39% to end at 18,119.59. A 2% decline in certain key stocks weighed on the technology-heavy index.

The major averages each extended their gains to a third week, with the S&P 500 and the Dow rising about 0.6% for the period. The Nasdaq advanced nearly 1% during the week. Traders received encouraging inflation data that could give the central bank more reason to confidently cut interest rates further.

August’s personal consumption expenditures price index — the Federal Reserve’s favored measure of inflation — increased 0.1%, matching expectations from economists. Policymakers and investors alike are hoping for persistent cooling in monthly inflation figures, allowing for continued easing of borrowing costs that will ease the strain on corporate and household balance sheets. “To the extent that inflation remains under control — and we continue to trend in that direction — the Fed can focus almost entirely on the labor market, which means a rate-cutting bias,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“As the Fed cuts rates — especially in the absence of recessionary growth — it is a great tailwind for both stock and bond markets and should eventually provide some relief for those consumers that are more interest-rate sensitive,” Zaccarelli added. Wall Street is coming off a winning session, after a batch of data assured investors of the strength of the U.S. economy. Initial jobless claims fell more than expected in the latest week, indicating a strong labor market, while the final reading of second-quarter gross domestic product came in at a robust 3%.

The yen strengthened around 1.7% against the dollar on Friday following the election of former defense minister Shigeru Ishiba as Japan’s next prime minister. The dollar was last trading at 142.4 yen.

Dow reaches record high milestone

Month to date, the yen has appreciated 2.6% versus the greenback, and is now just 1% lower against the dollar on a year-to-date basis. Material stocks in the broader index are poised to notch their best weekly performance this year. The sector has climbed 3.4% this week, on track to see the biggest gain among the 11 sectors that comprise the broad index, as well as its largest weekly advance since December.

Leading the sector higher were rallies in key stocks, though gains were somewhat restricted by declines in other stocks. The yield curve steepened back into positive territory last month. As the Fed continues to lower interest rates amid a robust U.S. macroeconomy, Wolfe Research expects the yield curve to continue steepening further.

“Our sense is that the recent steepening in the yield curve points to an increase in lending activity, especially to consumers,” wrote chief investment strategist Chris Senyek. “We expect the Fed’s Senior Loan Officer Survey, set to be released in early November, to show banks more willing to lend to consumers relative to last quarter.”

Two ETFs connected to China were poised to notch their biggest weekly gains ever, underscoring the boost tied to policies unveiled this week by the country’s central bank. Both ETFs climbed more than 18% so far this week.

This rally followed the People’s Bank of China’s announcement that it would issue a slate of policies aimed at bolstering the country’s economy. The Federal Reserve should cut interest rates by a quarter point at the next six Federal Open Market Committee meetings, according to Wharton’s Jeremy Siegel. “If they do a quarter point every meeting, we’re going to be at 3.5% by the middle of next year,” the finance professor said on Friday.

“That’s where we should be.”

Siegel added that he does not foresee rates ever getting as low as 2.9% unless the economy experiences a recession. The pan-European Stoxx 600 index closed at a new high on Friday. The index rose 0.5% to finish at 528.33 points.

Chemicals stocks led the gains, adding 2.75%, while autos stocks rose 2.23%. Luxury companies also saw significant increases.

Maya Johnson

Maya is the editor-in-chief of KillerStartups.com. She provides value to early-stage entrepreneurs through content and her weekly newsletter. Reach her at [email protected]

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