U.S. stock markets maintained their northward journey for two successive days closing higher on Wednesday. High expectations for a September interest rate cut and strong second-quarter earnings results boosted investors’ confidence in risky assets like equities. A sector churn was visible as market participants’ preferences shifted to cyclical stocks from the growth-oriented technology stocks. All three major stock indexes ended in positive territory.
The Dow Jones Industrial Average (DJI) gained 1% or 463.66 points to close at 44,922.27. Notably, 24 components of the 30-stock index ended in positive territory and six finished in negative territory. The blue-chip index is currently 0.4% away from its all-time high recorded in December 2024.
The tech-heavy Nasdaq Composite finished at 21,713.14, rising 0.1%, due to the strong performance by big corporations. This marked a new closing high for the tech-laden index. During intraday trading, the index recorded a new all-time high of 21,803.75.
The S&P 500 advanced 0.3% to finish at 6,466.58, marking a new closing high for the index. During intraday trading, Wall Street’s most observed benchmark posted a new all-time high of 6,480.28. Out of the 11 broad sectors of the broad-market index, 10 ended in positive territory, and one remained unchanged.
The Materials Select Sector SPDR (XLB), the Health Care Select Sector SPDR (XLV), the Energy Select Sector SPDR (XLE) and the Consumer Discretionary Select Sector SPDR (XLY) rose 1.9%, 1.6%, 1.2% and 1.4%, respectively.
The fear gauge CBOE Volatility Index (VIX) was down 1.6% to 14.49. A total of 16.4 9 billion shares were traded on Wednesday, lower than the last 20-session average of 18.3 billion. Advancers outnumbered decliners on the NYSE by a 4.05-to-1 ratio. On the Nasdaq, a 2.53-to-1 ratio favored advancing issues.
Market participants are highly hopeful of the first rate cut of 2025 by the Fed in its upcoming September FOMC meeting. Significantly weak job additions in the last three consecutive months and moderate inflation data for July bolstered investors’ expectations for a rate cut.
The CME FedWatch currently shows a 100% probability that the central bank will reduce the benchmark lending rate by 25 basis points in September. This probability was 84% just before the release of the inflation data on Aug. 12. Moreover, 6.2% respondents are expecting a 50-basis point cut in September. The existing Fed funds rate is in the range of 4.25- 4.5%.
