U.S. stocks rallied close to their record highs on Thursday following positive reports on the economy that met expectations. The S&P 500 rose 0.7% and is now within 1.3% of its record set in July after a volatile summer. The Dow Jones Industrial Average also gained 235 points, or 0.6%, and the Nasdaq composite rose by 1%. Strong performances from tech companies like Nvidia helped offset losses from vaccine maker Moderna, which revised its financial forecast to break even in 2028, delaying its earlier prediction of 2026 due to reduced sales post-COVID-19.
Treasury yields remained steady in the bond market despite reports on unemployment benefits and inflation that held few surprises. While the data did not significantly change the prevailing view that the U.S. economy is slowing down along with inflation, it reinforced expectations of an interest rate cut by the Federal Reserve next week to protect the job market and prevent a recession. The number of U.S. workers applying for unemployment benefits ticked up slightly last week, while wholesale prices in August were 1.7% higher compared to one year ago.
The market continues to anticipate a traditional quarter-point rate cut by the Fed next week, rather than a larger half-point cut that had been previously expected. Lower interest rates can stimulate economic growth and investment but also fuel inflation. The yield on the 10-year Treasury edged up to 3.68%, stabilizing after a gradual decline since April in anticipation of rate cuts. The move by the European Central Bank to cut interest rates by a quarter-point for the second time aimed at boosting economic growth.
Concerns remain about the total amount of rate cuts that the Fed may implement and how the market will react. Traders are forecasting total cuts of more than 2 percentage points over the next year, down from the current federal funds rate range of 5.25% to 5.50%. Companies like Kroger and Alaska Air Group reported stronger profits for the latest quarter, boosting investor confidence. The S&P 500 gained 41.63 points to 5,595.76, the Dow rose 235.06 to 41,096.77, and the Nasdaq climbed 174.15 to 17,569.68. In global markets, European and Asian indexes also saw gains.
Overall, the positive reports on the U.S. economy, combined with anticipation of a rate cut by the Federal Reserve, have helped push U.S. stocks closer to their record highs. The performance of tech companies like Nvidia has been a key driver of the market rally, while concerns about inflation and unemployment remain in focus. Companies reporting stronger profits and revenue forecasts, such as Kroger and Alaska Air Group, have also contributed to investor optimism. As the market awaits the Fed’s decision next week, ongoing global economic conditions and central bank policies will continue to influence stock market movements both domestically and internationally.
