The stock market has reached record highs following the Federal Reserve’s recent interest rate cut. Investors are shifting towards riskier assets such as bitcoin and tech stocks in response to the rate cut, which marked a change from the Fed’s previous cycle of rate hikes. Strong economic data has fueled optimism in the market, with the S&P 500 and Dow both reaching new highs this week. The CNN Fear & Greed Index is currently showing a “greed” reading, indicating high market sentiment.
The Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, showed a 2.2% increase in prices for goods and services last month, slightly below expectations. Despite this, the economy appears to be on solid footing, with the US economy expanding at a 3% clip in the second quarter. Chief economist Gregory Daco of EY noted that a “soft landing” scenario, where inflation decreases without a recession, may be unfolding. The housing market also received a boost with mortgage rates hitting their lowest level in years and a surge in applications to refinance.
Looking ahead, investors are anticipating the September labor report for further insights into the health of the economy. The report is expected to show an increase in job additions from the previous month, signaling a stable labor market. Tech shares have performed well this week, buoyed by optimism surrounding the rate cut and strong earnings reports, including those from Micron. In China, stock prices surged after the central bank introduced measures to stimulate the economy by lowering interest rates.
Oil prices declined, while gold futures retreated from a recent record high and bitcoin saw gains. Despite fluctuations in commodity prices, overall market sentiment remains positive. The focus now shifts to the upcoming labor report, which will provide clues on the Fed’s future moves. With record highs being reached in various sectors and economic data pointing to stability, investors are cautiously optimistic about the market’s trajectory in the coming weeks.
