The Dow Jones Industrial Average closed slightly lower Thursday after briefly jumping above 40,000 for the first time, fueled by bets that inflationary pressures would ease and interest rates would come down.
At its high of the day, the average reached 40,051.05, the culmination of a bull market that began in October 2022. The index had neared the 40,000 mark earlier this year, before a slight April pullback on worries about high interest rates knocked it back down. The rally was rekindled in May on the back of strong earnings and some soft inflation readings.
Dow year to date
Ultimately, the 30-stock Dow ended the day lower by 38.62 points, or 0.1%, closing at 39,869.38. The S&P 500 fell 0.21%, closing at 5,297.10. The Nasdaq Composite ended the day off by 0.26%, ending at 16,698.32.
Earlier in the day, the broader market index climbed to a new record after closing above the 5,300 level for the first time ever on Wednesday, while the tech-heavy Nasdaq also hit an all-time high. The Dow has climbed nearly 6% in 2024, while the Nasdaq and S&P 500 are up 11% each.
“This achievement is a testament to the powers of capital formation, innovation, profit growth and economic resilience,” said John Lynch, chief investment officer at Comerica Wealth Management. “The recent technical momentum and fundamental strengths, including earnings and interest rates, suggest further near-term gains.”
It was Walmart that led the charge above 40,000 as the world’s biggest retailer popped 6% on strong fiscal first-quarter results. Walmart is now up 26% on the year.
The Dow’s march toward 40,000 comes as expectations of interest rate cuts and enthusiasm around artificial intelligence boost investor sentiment. The first Federal Reserve rate cut is priced in for September, according to the CME Group’s FedWatch Tool. That expectation grew after a smaller-than-expected increase in consumer prices for April was reported earlier this week.
On top of that, tech-related darlings such as Amazon, Meta Platforms and Nvidia are all up sharply year to date.
Amazon, which just joined the more than century-old Dow in the first quarter, is more than 22% higher for the year. Other top Dow performers this year include American Express and Goldman Sachs. Both stocks were up more than 20% as investors bet the economy would skirt a recession and the consumer would remain strong.
Baird analyst Ross Mayfield believes this rally higher still has the strength to continue.
“This has all the signs of a cyclical bull market and it’s not running out of steam as far as we can tell,” he told CNBC in an interview.