Dow stabilizes after topping 40,000 for the first time ever

The Dow Jones Industrial Average soared above 40,000 for the first time ever, marking the beginning of a bull market that began in October 2022. The index had reached the 40,000 mark earlier this year, but a slight April pullback due to high interest rates knocked it back down. The rally was rekindled in May on the back of strong earnings and some soft inflation readings. The S&P 500 and Nasdaq Composite were both trading flat on Thursday.

The Dow has climbed more than 6% for 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.

The recent technical momentum and fundamental strengths, including earnings and interest rates, suggest further near-term gains. Walmart led the charge above 40,000, gaining 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. Tech-related darlings such as Amazon, Meta Platforms, and Nvidia are all up sharply year to date. Amazon, which just joined the over century-old Dow in the first quarter, is more than 22% higher for the year.

Analysts believe this rally higher still has the strength to continue, with all the signs of a cyclical bull market. GameStop retail participation hit a 3-year high on Monday, with everyday traders involved at a level of around 30%. However, the meme stock rallies have fizzled as the week has gone on, making Monday’s moves appear more of a fad than a harbinger.