Dow Closes at Record High, Boosted by Tame Inflation Report and Small Caps – Reuters

By Echo Wang

The blue-chip index reached an all-time high as a recent inflation report fueled expectations for further rate cuts by the Federal Reserve. This development also lifted small-cap stocks, allowing Wall Street’s three main indices to achieve weekly gains.

Although the technology-heavy Nasdaq dipped slightly and the S&P 500 edged lower, both indices remained close to their recent record highs.

"The market is currently pricing in a soft landing, suggesting that inflation has been tamed and that the Fed might lower rates without significantly harming the economy," stated Liz Young Thomas, head of investment strategy at SoFi in New York.

The Commerce Department revealed a modest increase in consumer spending, while inflationary pressures continued to wane. Additionally, the University of Michigan’s final consumer sentiment index for September registered at 70.1, exceeding economists’ predictions of 69.3.

The Dow Jones Industrial Average rose by 137.89 points, or 0.33%, closing at 42,313.00. Meanwhile, the S&P 500 decreased by 7.20 points, or 0.13%, to finish at 5,738.17, and the Nasdaq declined by 70.70 points, or 0.39%, ending at 18,119.59. The small-cap index, which tends to thrive in a low-rate environment, saw a gain of 0.67%, reaching a one-week high.

Shares of Nvidia fell by 2.17%, contributing to the day’s losses for the Nasdaq. Current investor sentiment indicates a slight preference for a 50-basis-point rate cut at the Fed’s upcoming meeting, with a 52.1% chance now being forecasted, an increase from earlier estimates that were nearly even.

The easing of price pressures led the Fed to reduce rates by 50 bps last week, shifting attention toward upcoming labor market reports set to release next week.

In individual stock movements, Bristol-Myers Squibb climbed 1.58% after the U.S. FDA approved one of its schizophrenia medications. Conversely, Costco Wholesale saw a decline of 1.76% following disappointing fourth-quarter revenue results.

U.S.-listed shares of Chinese companies enjoyed a boost, with Alibaba rising 2.15%, PDD Holdings increasing by 4.67%, and NetEase gaining 2.65%. This surge followed China’s central bank’s decision to lower interest rates and inject liquidity into the banking system.

The positive sentiment extended to mining stocks, with Arcadium climbing 2.13% and U.S.-listed shares of BHP gaining 1.81%.

On the NYSE, advancing issues outnumbered decliners by a ratio of 1.82 to 1, resulting in 605 new highs and just 31 new lows. The S&P 500 recorded 42 new 52-week highs and no new lows, while the Nasdaq Composite saw 74 new highs alongside 65 new lows.

Trading volume across U.S. exchanges reached 11.50 billion shares, slightly below the 11.87 billion average for the previous 20 trading sessions.

(Reporting by Echo Wang in New York; with additional contributions from Johann M Cherian and Purvi Agarwal in Bengaluru; editing by Anil D’Silva, Maju Samuel, and David Gregorio)