The stock market rallied on Friday as investors bet on potential rate cuts, with the Dow Jones Industrial Average climbing over 200 points to close above 40,000 for the first time since mid-May. This surge in the market was fueled by positive economic data showing cooling consumer inflation and only a mild increase in producer prices.
The small-cap Russell 2000 also saw significant gains for the second day in a row, jumping more than 1% after a 4% surge on Thursday. This broad market rally was a welcome change from the previous focus on mega-cap tech stocks associated with the AI trade.
The positive economic data has increased the likelihood of a rate cut in September, with the CME FedWatch Tool showing nearly 90% odds of the Federal Reserve lowering interest rates at the upcoming FOMC meeting. There is also growing speculation about a 50 basis points rate cut at the December meeting, with traders placing bets on the fed funds rate dropping to 4.50%-4.75% by the end of the year.
As bond yields have tumbled in response to the favorable economic data, investors are turning their attention to stocks that were previously held back by tighter Fed policy. This shift has eased concerns about market concentration among tech giants like Nvidia, opening up new opportunities for investors.
In commodities, oil futures dipped slightly, with West Texas Intermediate crude falling to $82.23 a barrel and Brent crude dropping to $85.07 a barrel. Gold prices slipped to $2,418 per ounce, while the 10-year Treasury yield fell to 4.18%. Bitcoin saw a slight increase, trading at $57,836.
Overall, the market outlook is positive, fueled by expectations of rate cuts and favorable economic data. Investors are keeping a close eye on the Federal Reserve’s next moves and the potential impact on different sectors of the market. Stay tuned for more updates and insights from Extreme Investor Network.