Stock Markets Hit Record Highs on Fed Rate Cut Outlook
U.S. stock indexes closed higher on Thursday, setting new records. The S&P 500 rose 0.85%, the Dow Jones gained 1.36%, and the Nasdaq 100 added 0.60%. Markets were boosted by fresh macroeconomic data and growing confidence that the Fed will soon cut rates.
Macro Data Impact
August CPI came in line with forecasts, rising 2.9% year-over-year, while the core index held steady at 3.1%. However, initial jobless claims unexpectedly jumped to a 3.75-year high, signaling a softer labor market. This pushed Treasury yields lower, with the 10-year note dropping to a 5-month low of 3.99%.
Fed Rate Expectations
Futures now fully price in a 25 bp rate cut at the September 16–17 Fed meeting, with another almost guaranteed cut in October. Overall, markets expect a 72 bp drop in the federal funds rate by year-end, down to 3.61% from the current 4.33%.
Global Markets
Optimism spread abroad as well. The Euro Stoxx 50 gained 0.47%, China’s Shanghai Composite rose 1.65%, and Japan’s Nikkei 225 hit a record high, climbing 1.22%.
Sector Leaders
Tech and homebuilding stocks led the rally. Micron Technology surged more than 7% after Citigroup raised its price target, followed by strong gains in Lam Research, Applied Materials, and other semiconductor names. Lower bond yields supported homebuilders, with PulteGroup, Lennar, and DR Horton all rising over 2%.
Warner Bros Discovery soared 28% on reports of a potential Paramount Skydance acquisition bid, while Red Cat Holdings jumped 30% after its drone system was added to NATO’s procurement list.
Weak Spots
Not all stocks shared the gains. Oracle fell 6% on concerns tied to the Warner Bros deal, Boeing lost 3% due to delays in its 777X program, and Netflix slipped 3% after a key executive departure. AMD and Avidity Biosciences also declined.
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