Key points:

  • The Dow Jones index touched the 40,000 point mark for the first time in history, but along with other indexes it closed lower.
  • The consumer staples sector led the gainers, led by Walmart shares, which rose 7%.
  • Two rate cuts of 0.25% are expected in 2024, the first of which could occur as early as September.

American stock indices ended Thursday’s trading session with a fall. During trading, the Dow Jones index briefly touched 40,000 points for the first time, but then a pullback followed. Traders are re-evaluating their forecasts for the pace of interest rate cuts, given both slowing inflation and encouraging corporate earnings reports.

The Dow Jones Industrial Average fell 38.62 points, or 0.10%, to 39,869.38. The S&P 500 fell 11.05 points, or 0.21%, to 5,297.10, and the Nasdaq Composite fell 44.07 points, or 0.26%, to 16,698.32.

Walmart and consumer goods sector leading growth

Despite the Federal Reserve’s decisive interest rate hike, the blue-chip S&P 500 index has managed to recover losses and rise above its October 2022 lows, demonstrating the resilience of the American economy.

Sector dynamics were mixed: 10 out of 11 S&P 500 sectors ended the day in the red, with the exception of the consumer goods sector, which acted as the growth leader.

Walmart shares soared 7% after the retail giant raised its fiscal 2025 sales and profit forecast. The company expects that lower inflation will stimulate growth in demand for essential goods.

On the other hand, Deere shares fell 4.8%. The farm equipment maker cut its full-year profit forecast for the second time in a quarter, raising concerns among investors about the company’s prospects.

Despite the mixed picture in individual sectors, overall market activity was quite strong. The S&P 500 recorded 64 new 52-week highs and just one low, while the Nasdaq posted 188 new highs and 58 lows.

Is an interest rate cut possible in September?

Investors are highly likely to expect two 0.25% interest rate cuts by the Federal Reserve this year, according to the CME FedWatch Tool. The probability that the first decline will occur in September is estimated at 70%.

The US stock market reacted with growth to encouraging inflation data. All three major Wall Street indexes hit record highs on Wednesday after it was reported that consumer price growth in April was lower than expected. This indicates that inflation may have resumed its slowing trend.

However, US jobless claims data showed a mixed picture on Thursday. New applications fell last week, but the labor market remains tight despite a slowdown in job growth.

In general, investors’ focus is shifting to the question of further actions by the Fed. At the beginning of the year, the Fed was forecast to cut rates six times, but those expectations have recently dropped to one or two.