Friday, May 17th, marked a historic day for the US stock market, with the Dow Jones Industrial Average closing above 40,000 for the first time ever. This milestone capped off a positive week for all major indexes.
Mixed Performance Across Major Indexes
The record-breaking close for the Dow wasn’t the only positive news. The S&P 500 also inched higher by 0.12%, while the tech-heavy Nasdaq Composite ended the day with a slight decline of 0.07%.
Federal Reserve Influence
Investors continued to react favourably to the Federal Reserve’s more accommodative stance which rules out any hikes, alleviating concerns about a tightening monetary policy.
On Wednesday, the headline consumer price index (CPI) for April increased at a slower-than-anticipated rate, while the core CPI cooled for the first time since October 2023.
Following the data, investors ramped up their Federal Reserve interest rate-cut bets.
Positive Earnings Season
The positive earnings season also contributed to investor confidence. Strong reports from companies like Walmart (WMT) and Caterpillar (CAT) added to the overall market optimism.
Weekly Performance Summary
Overall, Friday’s trading session and the broader week showcased a continuation of the positive trend in the stock market.
For the week, the S&P 500 added 1.5%, the blue-chip Dow rose 1.2%, and the tech-heavy Nasdaq Composite climbed 2.1%.
Closing levels on Friday:
| Index | Last | Change | %Change |
| DOW JONES | 40,003.59 | +134.21 | +0.34% |
| S&P 500 | 5,303.27 | +6.17 | +0.12% |
| NASDAQ | 16,685.97 | -12.35 | -0.07% |
| US 10Y | 4.42% | ||
| VIX | 11.99 | -0.43 | -3.46% |
Market Sentiment and Outlook
The market remains bullish. Although stalled at the end of the week, it did not retrace.
The GameStop drama tells us that there is still a lot of liquidity in the market, and people are still willing to take on risk.
The VIX, or fear gauge, below 12 also confirms that we are in a risk-on mode. The “bad news is good news” trend persists, and until the market realizes that bad news is actually bad, the rally will likely continue. Unfortunately, the market tends to realize this when it’s too late.
Unfortunately, the market tends to realise this when it’s too late.
For now, enjoy the ride and hope there is no catalyst for a big reversal. Small reversals can be expected, but the way the market is trading suggests that dips will be shallow and attract buyers.
A word of caution: the higher we go, the harder we may fall. That’s just me being the unbelieving follower of the bull run.
Looking ahead, all eyes will be on NVIDIA earnings. Revenue is expected to be strong but the guidance for forward earnings will be crucial.
Source: CBOE, Bloomberg
This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable U.S. bank exceeding 20 years.
