Dow Hits Record High as US Stocks Rally on Fed Rate Cut Hopes

US Stocks Rally as Dow Hits Record High on Rate Cut Hopes

US stocks rose on Monday, with the Dow Jones Industrial Average closing at a record high as investors grew increasingly optimistic about potential interest rate cuts from the Federal Reserve. The S&P 500 also reached a new peak, while the Nasdaq composite edged higher.

Market sentiment was buoyed by a significant shift in expectations for the Fed’s next move. The CME’s FedWatch Tool showed that the probability of a 50 basis point rate cut at the Federal Reserve’s November meeting jumped to 53%, up from 29% last week.

Comments from Fed officials played a crucial role in fueling these expectations. Chicago Fed President Austan Goolsbee emphasized the need to focus more on the jobs market rather than inflation, suggesting that multiple rate cuts could be expected over the next year to achieve a soft landing in the economy.

Minneapolis Fed President Neel Kashkari added to the dovish tone, projecting the long-term Fed funds rate to sit around 2.9%. Kashkari noted that the balance of risks has shifted towards a weakening labor market, potentially justifying a lower federal funds rate.

Investors will be closely watching nine more scheduled speaking engagements for Fed members this week, as well as key economic data releases. Consumer confidence data is due on Tuesday, followed by a revision to second-quarter GDP growth on Thursday, and fresh inflation data on Friday. The Federal Reserve’s preferred inflation gauge is expected to show prices increased by 2.2% last month, approaching the central bank’s 2% target.

At the closing bell, the S&P 500 was up 0.28% at 5,718.57, while the Dow Jones Industrial Average gained 0.15% to 42,124.65, adding 61.29 points. The Nasdaq composite rose 0.14% to 17,974.27.

In commodities, West Texas Intermediate crude oil decreased 0.73% to $70.48 a barrel, and Brent crude was down 0.67% to $73.99 a barrel. Gold saw a modest increase of 0.19% to $2,651.20 an ounce. The 10-year Treasury yield inched up about 1 basis point to 3.751%, while Bitcoin dipped 0.37% to $63,352.

As the market continues to digest these developments, investors remain cautiously optimistic about the economic outlook and the potential for further monetary policy easing in the coming months.