The Dow Jones Industrial Average has reached a significant milestone, surging above the historic 40,000 mark in late morning and early afternoon trading. This achievement is a testament to the current state of the economy, with a cooler April CPI print, dismal retail data, cooling Philly Fed data, surprisingly weak home-building activity, and a flat industrial production report all pointing towards a potential soft-landing approach. The Federal Reserve is likely to start cutting interest rates in the second half of the year, further bolstering investor confidence. However, the celebration was short-lived, as broad selling pressure hit US equity indexes around 1300 ET, pushing them flat to red for the session and causing the Dow to lose the 40,000 mark.
Despite this setback, experts believe that the breakout to all-time highs earlier in the week is a significant psychological boost for the bulls, as round numbers hold special significance in people's hearts and minds. The equity market continues to respond positively to the data, which suggests a 'soft' landing rather than the 'strong' landing that many had feared. The re-establishment of a disinflation trend in the coming months should allow the Fed to start easing policy in September, further supporting market growth.
Earnings reports have been largely positive, with 60% of the total S&P 500 market cap beating earnings, compared to the 15-year average of 48%. The Vix, a measure of market volatility, has tumbled to its lowest intraday level since December, indicating a more stable market environment. However, JPMorgan CEO Jamie Dimon's warning about persistent inflation surprising markets serves as a cautionary tale, particularly for corporate bond markets.
As the Dow hovers around the 40,000 mark, investors are left wondering whether this level will be sustained or if it is merely a 'kiss of death' before a potential market correction.
The information contained in this Higgins Capital communication is provided for information purposes and is not a solicitation or offer to buy or sell any securities or related financial instruments in any jurisdiction. Past performance does not guarantee future results.
DJIA40000, USEconomy, inflation, cpi, retirement planning, investing, stock market