The record-breaking streak by Wall Street continued as investors rejoiced over accumulating signs that the Federal Reserve will ultimately reduce interest rates next week, lifting key indexes to fresh all-time highs as mixed economic statistics played to heightened anticipation that policy makers needed to move decisively to avoid a bubble of economic decadence that would descend into recession.
Large indices broke records on Thursday
The record-setting run on Wall Street continued through Thursday, and stocks rose as a mixed set of U.S. data continued to clear the way for the Federal Reserve to lower interest rates in order to stimulate the economy, according to the Oskaloosa Herald. S&P 500 upsurged by 0.8% and hit a record for the third consecutive day. The Dow Jones Industrial Average rose 617 points or 1.4% and the Nasdaq composite rose 0.7%. Both also hit records.
The economic reports, which were among the last data releases to be released that could influence the thought process of the Federal Reserve ahead of its next meeting next week, helped ease treasury yields in the bond market. Wall Street is in unanimous anticipation that it will reduce its main interest rate for the first time this year.
Weak economic indicators favour a rate cut case
Thursday, one of the reports indicated that more U.S. workers were claiming unemployment benefits last week, which is some evidence that the layoff count might be on the increase. It is the most recent bad news of the job market, where employment is dropping significantly. The labor market had appeared to be stabilizing at a low-hire, low-fire condition, although a rise in layoffs would place it in an even tighter vise.
It has been the hope on Wall Street that there would be a slowing, but only to a certain degree. The labour market must be poor enough to prompt the Fed to reduce interest rates, which can provide a jolt to both the economy and investment prices, but not so poor that it results in a recession.
Inflation concerns remain, but the job market takes priority
According to Yahoo Finance Canada, an inflation report on Thursday revealed that U.S. households are still seeing prices increasing at a rate that is higher than the Fed wants, yet only to the levels that economists forecast. Food, gasoline and other cost of living items were 2.9% more expensive in August than a year ago, slightly faster than Julys 2.7% inflation rate. That is over the Fed target of 2%, but traders think the slowing job market will be the issue that the Fed will think is larger now than inflation.
The performance of individual stocks is motivating market gains
According to Ellen Zentner, the chief economic strategist at Morgan Stanley Wealth Management, right now, inflation is a major side plot, although the labor market remains the headline. Shares of companies that might enjoy low interest rates on Wall Street surged, such as real estate owners and homebuilders. Builders FirstSource, a seller of cabinets, lumber, and other building materials, increased 4.5%.
Centene has contributed to the lead of the market by making a leap of 9%. The health care firm reported that its business performance up to August is on track with its profit prognosis for the year that it had previously reported. Opendoor Technologies surged up by 79.5% following the declaration of the firm that it employed the chief operating officer of Shopify, Kaz Nejatian, as its chief executive officer.
The incredible surge on Wall Street can be attributed to the fact that investors have increased confidence that the Federal Reserve will provide long-overdue interest rate relief next week. As unemployment increased and inflation levels declined, market participants think that policymakers have enough reasons to start relaxing monetary policy, which may lead to fresh economic growth and additional market gains.