The Dow Jones Industrial Average rose nearly 140 points Friday, or .33% to 42,313 which is a new record high. All three major stock market averages rose last week – the Dow gained .6% – the NASDAQ Composite rallied nearly 1% to 18,120 – while the Standard & Poor’s 500 Index advanced .6% to 5,738. These three indices have now registered 3 consecutive winning weeks.
Factors behind the weekly gains include continued optimism and momentum after the Federal Reserve cut interest rates the week before last, a fresh batch of economic data indicating relative strength in the U.S. economy and encouraging inflation data. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures price index rose only 0.1% in August. The PCE increased 2.2% on an annualized basis, a notch better than the consensus forecast and nicely below the previous reading of 2.5%. The cooling inflation data has convinced the market more interest rate cuts are ahead, and possibly even another ½ point cut in November.
According to CME FedWatch the probability is 100% the Federal Reserve will be cutting rates at their November 7th policy meeting. Interestingly, it is currently a close call as to whether the Fed will cut rates ¼ point or deliver another outsized ½ percentage point interest rate cut. As of yesterday evening, the CME FedWatch indicated a 47% probability for a ¼ point cut and a 53% probability for the larger ½ point cut.
While September is historically the worst month for the stock market, the above macro situation has resulted in this September being just fine, thank you very much, as seen by the 3-week win streak for the major averages and some new record closing highs. Looking to the week ahead, we’ll get what is widely viewed as the most important data point of them all, the monthly Jobs Report. The U.S. Bureau of Labor Statistics releases the jobs report Friday morning, with consensus estimates for a gain of 140,000 jobs and the unemployment rate holding steady at 4.2%. This report will be influential in determining the Federal Reserve’s next move at their November meeting.
As always, don’t hesitate to contact us with any questions or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC