What Fueled This Week’s Record-Breaking Stock Rally

The stock market is reaching new highs once again. Investors are quickly shifting towards riskier assets like bitcoin and tech stocks, following last week’s anticipated interest rate cut by the Federal Reserve.

The S&P 500 and Dow both reached new records after the Fed announced a half-point rate cut, a change from the previous aggressive rate hikes that had pushed rates to their highest in 23 years.

CNN’s Fear & Greed Index, which tracks seven indicators of market sentiment, currently shows a “greed” level.

Strong economic data has fueled market gains this week. On Thursday, the S&P 500 marked its 42nd record high close in 2024, and the Dow closed at a record high for the 32nd time this year on Friday. All three major indexes ended the week on a positive note: the Dow rose 0.6%, the S&P 500 gained 0.6%, and the Nasdaq Composite increased by 1%.

The Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, revealed a 2.2% rise in consumer prices last month compared to the previous year, down from 2.5% in July. This was below economists’ expectations and brings inflation closer to the Fed’s 2% target. Additionally, fresh data showed that the US economy grew by 3% in the second quarter compared to last year.

Gregory Daco, chief economist at EY, commented on Thursday that a “soft landing” for the economy, where inflation decreases without triggering a recession, seems to be unfolding.

In the housing market, the average 30-year fixed mortgage rate dropped to its lowest point since September 2022, according to Freddie Mac. Mortgage refinance applications jumped 20% from the previous week, per the Mortgage Bankers Association. The housing market is known for reacting to economic shifts.

Looking ahead, investors are focused on the September labor report, expected next Friday. Employers likely added 142,000 jobs last month, up from July’s lower figures, while unemployment is expected to drop to 4.2%. This report could influence the Fed’s next steps at their November meeting. Tech stocks also saw gains this week, boosted by optimism over rate cuts and strong earnings from Micron. Nvidia shares rose 4.6%, Tesla gained 9.3%, and Meta Platforms increased by 1.1%.

In China, stocks surged after the central bank introduced measures to stimulate its slowing economy, including interest rate cuts.

Oil prices fell this week, with the national average gas price at about $3.21 per gallon, according to GasBuddy. The Financial Times reported that Saudi Arabia may abandon its goal of $100 per barrel for oil.

Gold futures pulled back after hitting a new record high on Thursday, part of a trend of record highs this year driven by central bank purchases and concerns about the US economy.

Bitcoin also saw gains, with its price trading around $65,747 per coin.

As the trading session closes, these levels could see slight adjustments.