Stock Market Astonishment as Dow Breaks New Records Amidst Fed Uncertainty
Wall Street traders are mulling over fresh insights from Federal Reserve bankers: could interest rate cuts be on hold longer than previously anticipated? Despite a slight air of apprehension, US indices continue their upward climb. On the contrary, the gold price has put the brakes on its recent high-speed rally.
The bullish migration on Wall Street following the Fed’s latest decision seems to have hit a speed bump. The leading US index, the Dow Jones, recorded a gain of 0.2% to touch a new record high of 37,305 points. The tech-centric Nasdaq advanced by 0.4%, and the broad-based S&P 500 closed on an almost flat line at 4,719 points. These results mark the third consecutive record close for the Dow. On a weekly basis, all three indices have witnessed uninterrupted growth, a feat last achieved by the S&P 500 in 2017.
The gloom crept in due to new declarations from US central bankers. Fed representative John Williams stated that the current talk about interest rate cuts is "premature," in an interview with US broadcaster CNBC. The pet project of investors, interest rate cut fantasies, following the Fed meeting on Wednesday, caused a momentary spike on the stock markets. However, the monetary authorities hinted at considering downward steps as early as 2024. Michael Hewson, chief analyst at broker CMC Markets, commented, “After Powell's U-turn party, we have now been shaken up by Williams.” But Art Hogan, chief strategist at asset manager B. Riley Wealth, remained unfazed: “It's not unusual for Fed spokespeople to try to quell exaggerated reactions to a particular Fed meeting.”
Gold in a Turmoil
The dollar index settled at 102.615 points, rebounding from its recent losses with a half percent surge. In contrast, the euro took a hit, falling by 0.9% to 1.0891 dollars. Moreover, the gold price showcased an unstable behaviour. The precious metal set back by 0.8%, yet it held its own at around 2,019 dollars per troy ounce on a weekly basis. Hewson observed, “Gold experienced a wild rollercoaster ride this week.” First, the price plummeted to a four-week low before rallying strongly after Powell’s statements on Wednesday. Now, Williams’ resistance is dampening investor delights. However, the gold price is expected to wind up the week with a decent increase. On Friday evening, it was approximately 1% higher than its previous week’s closing price.
Oil Prices on a Tenuous Recovery
Meanwhile, oil prices embarked on a hesitant recovery. North Sea Brent crude and light US WTI crude rose slightly to 76.76 and 71.59 dollars per barrel (159 liters) respectively, following a decline of up to 1.7% due to a reduction in new orders in a US industry survey. Investors interpreted this as a harbinger of weaker demand for oil in the coming year. Phil Flynn, analyst at broker Price Futures, elaborated, “The market is highly responsive to every headline. Investors are still uncertain if oil prices have hit rock bottom.”
Institutional Highlights
The ‘big expiry date,’ when investors aim to tug the prices of securities on which they hold derivatives, had its impact. Futures and options on indices as well as options on individual shares expired during the day on the ‘witches' Sabbath.’ Costco, among others, experienced an upsurge of 4.4%, thanks to a bountiful Q1 earnings report, driven by robust demand for low-cost food. The company’s sales climbed by 6.1% to 57.8 billion dollars in the first quarter. Analyst expectations surmised an average of 57.72 billion dollars.
Intel shares also enjoyed a moderate increase of around 2.2% to 46.16 dollars, backed by BofA Global Research analysts who upgraded the company’s stocks to ‘Neutral’ from ‘Underperform.’ The target price was raised to 50 dollars, in part due to growth prospects with chips for vehicle sensors.
Further Reading:
The Dow’s unyielding ascent to a new record high of 37,305 points despite the Fed’s ambiguous stance on interest rate cuts, leaves stock traders in a state of intrigue.
