The stock market is set to wrap up another successful month as major indexes climb toward new records. The S&P 500 rose by 0.5% early in the day, aiming to surpass last week’s all-time high. The Dow Jones Industrial Average also made gains, up by 0.1% or 55 points by 9:40 a.m. Eastern time. The Nasdaq composite showed strength as well, climbing by 0.8% and nearing its 2021 record.
Bond markets were calm, with yields easing slightly, following an inflation report that showed prices increased in line with expectations last month. This data eased concerns about a sharp uptick in inflation. Previous reports had shown higher-than-expected price increases in January for both consumers and wholesalers.
Brian Jacobsen, chief economist at Annex Wealth Management, commented, “While inflation was higher than usual, it may be a temporary spike rather than the start of a more concerning trend.”
The report reinforced expectations that the Federal Reserve would begin cutting interest rates in June, a move aimed at easing economic pressure and boosting investment prices. The Fed has hinted at multiple rate cuts this year, with its main interest rate currently at its highest level since 2001, intended to curb inflation by slowing down the economy through higher mortgage and credit card payments.
However, any rate cuts would require more convincing data that inflation is moving sustainably toward the Fed’s target of 2%. Hopes for rate cuts initially drove a rally in the U.S. stock market in late October, with the S&P 500 set to complete its fourth consecutive winning month.
Recent strong economic reports have pushed back expectations for when the Fed might cut rates, with forecasts moving from March to later dates. Thursday’s report showed fewer Americans filed for unemployment benefits last week than expected, indicating a resilient job market.
Companies continue to report strong earnings, contributing to market optimism. Salesforce.com beat analyst profit expectations for the latest quarter and announced plans to pay a quarterly dividend, although its revenue forecast fell slightly short. Best Buy saw its stock rise by 6% after reporting better-than-expected profit and revenue, along with plans to increase its dividend and growing paid membership base.
Hormel Foods also exceeded profit and revenue expectations, driven by growth across its brands, including Skippy peanut butter, Chi-Chi’s salsa, and Corn Nuts snacks, leading to a 16.2% increase in its stock price.
However, Bath & Body Works saw a 5.9% decline despite beating profit expectations, as it warned of potential sales weakening in the upcoming year.
Snowflake, a cloud-computing company, shocked investors with a 19.3% drop after announcing the immediate retirement of CEO Frank Slootman. Sridhar Ramaswamy will replace Slootman.
In the bond market, the yield on the 10-year Treasury fell to 4.25% from 4.27% late Wednesday, while the two-year yield, which reflects Fed rate expectations, dropped to 4.64% from 4.65%.
International markets saw mixed results, with Tokyo’s Nikkei 225 down 0.1% due to falling factory output in January, while Hong Kong’s Hang Seng slipped 0.2%. Stocks in Shanghai rose by 1.9%, and Shenzhen’s smaller index surged further after regulators announced new measures to support markets, including closer oversight of financial derivatives.
Featured Image: Freepik @ wirestock
