The Dow Jones Industrial Average (DJIA) is continuing its upward climb towards fresh all-time highs, approaching the 40,000.00 mark. This surge comes as US CPI inflation has ticked lower in April, sparking renewed hopes for Federal Reserve (Fed) rate cuts in the third quarter of 2024. Additionally, US Retail Sales have eased, further bolstering expectations that the Fed will be prompted to make a cut in the near future.
US CPI inflation data for April revealed a decrease to 0.3% MoM, slightly below the forecasted 0.4%. Core US CPI also dipped to 3.6% YoY, meeting expectations and indicating progress towards the Fed’s 2% annual target. With inflation showing signs of cooling and economic activity weakening, there is growing speculation that a 25-basis-point rate cut could occur in September.
In line with the softening inflation and retail sales figures, market sentiment is increasingly leaning towards Fed rate cut bets. The CME’s FedWatch Tool currently indicates a 71% probability of a rate cut in September. This uncertainty is reflected in the performance of the Dow Jones, which saw a modest increase during the US market session, with about two-thirds of its components trading in the green.
Despite some individual stock movements, the Dow Jones is on an upward trajectory, inching closer to record highs after a mild pullback near 37,500.00. The index is currently trading well above the 200-day Exponential Moving Average (EMA) and has been on a steady rise, up nearly 6% for the year and 18% since surpassing the 200-day EMA in November.
Overall, the Dow Jones is showing strong bullish momentum, with investors optimistic about the prospect of further gains and a potential push towards the 40,000.00 milestone. As economic indicators continue to influence market expectations, the focus remains on the Fed’s response to inflation and retail sales data, with many anticipating a rate cut in the coming months.
