Since the stock market bottomed in April, the venerable Dow Jones Industrial Average has risen 22%.
That's rather a nice gain. But the Dow hasn't seen a new high since December. Unlike the Standard & Poor's 500 Index, the Nasdaq Composite and the Nasdaq-100 Index which seem to hit new highs daily just now, including Wednesday.
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It looks like new highs are in reach for the blue-chip index. The 30-stock average closed up more than 400 points Wednesday and was less than a percentage point below its Dec. 4 closing high of 45,014.
But pushing the Dow 464 points higher to Wednesday was not the tech stocks in the average, which include Nvidia (NVDA) , Microsoft (MSFT) and Apple (AAPL) .
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It was Home Depot (HD) , Sherwin-Williams (SHW) , UnitedHealth Group (UNH) and Visa (V) .
Sherwin-Williams, Home Depot and Visa, especially, are consumer facing stocks. And they all stand to gain because Wall Street is now betting on interest-rate cuts in the months ahead.
Sherwin-Williams sells paint. Home Depot sells tools, lumber, sandpaper, wood, appliances, plants and, yes, paint, too.
Building contractors and do-it-yourselfers need paint. They need tools, wood, grout, nails, pipe, and wiring.
And Visa is one of the very biggest payment processors.
The Federal Reserve may well start trimming its key interest rates in September. Maybe by a quarter point, maybe a lot more if President Trump gets his way.
That makes closing a sale that much easier.
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Treasury Secretary Scott Bessent has advocated for a half-percentage point cut in the federal funds rate in September, now at 4.25% to 4.5%, and a total of 1.5 percentage points in the coming months.
That would bring the Fed funds rate down to perhaps as low as 2.75%.
But the fed funds rate, the starting point for the derivation of short term interest rates, has only a modest effect on mortgages.
Watch the bond market
Mortgage rates are coming down a bit, welcome news for home buyers and sellers. (Although it also true that affordability remains a huge problem in some of the biggest markets, especially California.)
The cause for the welcome news is that the key 10-year Treasury yield is now at 4.245%, down from 4.8% in January. Mortgage rates are largely derived from long term bond yields.
Consumers know — or are starting to believe — rates are coming down. The Mortgage Bankers Association noted a surge in refinancing applications.
The iShares U.S. Home Construction exchange-traded fund (ITB) was up nearly 4.7% to $111.20 today and 32.1% since the April market bottom.
The ETF includes home builders D.R. Horton (DHI) , up 4.6% today to $165.55 and Lennar (LEN) , up 5.2% to $130.89. In addition to Sherwin- Williams and Home Depot, Lowe's Companies (LOW) , up 4.7% to $256.33.
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The Dow has just 30 stocks and is divided into 10 sectors. (It doesn't break out real estate as the S&P 500 does.). Seven of the Dow components are tech or near-tech stocks: Apple, Amazon (AMZN) , Microsoft, Nvidia, IBM (IBM) , Cisco Systems (CSCO) and Salesforce Inc. (CRM) .
The odd-man out index
The Dow is the odd-man out index. Its value is weighted on the basis of stock prices. That is, the higher a Dow stock's price, the more it influences the index overall.
The S&P 500 and Nasdaq indexes are built around market capitalizations. At the end of July, according to Standard & Poor's, the top 10 S&P 500 stocks represented 38% of the index market cap, which was about $56 trillion.
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