Stock Market Reaches New Highs Amid Inflation Data and Fed Decisions

June 13, 2024
Paul Svensen

The stock market has reached new highs as investors react to recent inflation data and decisions from the Federal Reserve. The S&P 500 and Nasdaq Composite have both set new records, while the Dow Jones Industrial Average has experienced some fluctuations. Key factors include cooling inflation and the Fed’s interest rate projections.

Key Takeaways

The S&P 500 and Nasdaq Composite have set new record highs.
The Federal Reserve has kept interest rates unchanged but signaled fewer cuts this year.
Cooling inflation data has positively impacted market sentiment.
Technology stocks have been a significant driver of market gains.

Market Performance

The S&P 500 and Nasdaq Composite both finished at new record highs, with the S&P 500 closing above 5,400 for the 28th time this year. The tech-heavy Nasdaq Composite rose about 1.5%, adding to its record close from the prior day. In contrast, the Dow Jones Industrial Average gave up 0.1%.

Federal Reserve Decisions

The Federal Reserve kept interest rates steady at multi-decade highs and projected just one rate cut this year, down from three in March. Policymakers also projected core inflation would end the year at 2.8%, an increase from March’s projection. Fed Chair Jerome Powell emphasized the importance of data in future decisions.

Inflation Data

The Consumer Price Index (CPI) for May showed a deceleration in inflation, with prices rising 3.3% over the prior year, down from April’s 3.4%. On a core basis, which excludes volatile food and gas prices, inflation climbed 0.2% over the prior month and 3.4% over the last year, both measures beating economist expectations.

Technology Stocks

Technology stocks have been a significant driver of market gains. Apple shares hit a new all-time high, briefly surpassing Microsoft’s market cap. Broadcom shares surged 11% after topping fiscal second-quarter expectations and announcing a 10-for-1 stock split. Tesla shares also rose following positive news about CEO Elon Musk’s pay package.

Broader Market Trends

Despite the positive performance of major indexes, market breadth has been narrow. Only 76 S&P 500 stocks were rising on the day, and the Invesco S&P 500 Equal Weight ETF, which weighs every S&P 500 stock equally, was down 0.9%. Seven of the ten major S&P 500 sectors were down 0.7% or more, with technology being the only major sector rising.

Future Outlook

Investors are cautiously optimistic about the future, with many expecting the market to broaden out when rate cuts actually start rolling out. Analysts believe that the current focus on monetary policy will continue to influence market trends, but a broader rally could occur once rate cuts are implemented.

Conclusion

The stock market’s recent performance highlights the complex interplay between inflation data, Federal Reserve decisions, and sector-specific trends. While technology stocks have driven much of the recent gains, broader market participation will be crucial for sustained growth.