The Dow Jones Industrial Average surpassed 40,000 points for the first time on Thursday as investors grew more confident that the stock market's rally could continue on hopes that the Federal Reserve will begin cutting interest rates later this year.
The oldest of Wall Street's three major stock indexes has been boosted by the prospect of a resilient U.S. economy, falling inflation and strong corporate earnings. The Dow took 872 trading sessions through Wednesday to reach 10,000 points — or a 33% gain — with the index recouping all of its losses from the Federal Reserve's aggressive interest rate hikes over the past two years, according to data compiled by Bloomberg. Displays.
“Last year all traders wanted the Fed to signal that interest rates had peaked,” Jamie Cox, managing partner at Harris Financial Group, said by phone. “With interest rate cuts still expected later this year, this has fueled the recent rally in stocks as the reality suggests that corporate earnings outside of tech are also strong, helping to extend the rally.”
While the index has evolved over time since it was first launched in 1896 by American journalist Charles Dow, it remains a much narrower measure of stocks than the S&P 500 or Nasdaq 100, both of which have risen to record levels.
The main difference between the Dow Jones and the broader S&P 500 is the methods used to weight their component stocks. The Dow Jones Index is price-weighted, meaning that changes in higher-priced stocks have a greater impact on the level of the index than price changes in lower-priced stocks. However, the S&P 500 is weighted in terms of market cap.
Since the Dow Jones surpassed 30,000 for the first time in November 2020, Goldman Sachs Group Inc. and UnitedHealth Group Inc. and Caterpillar Inc. The largest point contributors to the index's latest milestone of 10,000 points – a journey that has taken more than three years. The blue-chip index's sharp 23% rise from its October 2023 lows was driven by industrial, technology and consumer stocks, with American Express rising more than 70% in that period.
The market is showing more and more confidence in a true soft landing or even no landing scenario as overall economic growth in the United States continues to remain strong, said Lisa Shalit, chief investment officer at Morgan Stanley Wealth Management. “It makes sense that a broader range of companies, even those that are more cyclical in areas like industrials, materials and energy, could do well.”