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Dow crosses 40,000 for the first time

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By Nicole Goodkind | CNN

New York  — The Dow broke past the 40,000 threshold Thursday morning for the first time ever, fueled by an encouraging inflation report.

The blue-chip index was up about 114 points, or 0.3%, and trading around 40,022 mid-morning.

Markets had rallied to new record highs Wednesday after the latest Consumer Price Index showed a cooldown for the first time in months, stoking hopes that the Federal Reserve could start cutting interest rates as soon as September.

On a monthly basis, the inflation report showed that prices rose 0.3%, a slower pace than in the two months prior, according to the Bureau of Labor Statistics. Economists were expecting a 0.4% monthly increase, according to FactSet consensus estimates.

Another key data point added to the enthusiasm: April retail sales came in significantly weaker than expected, indicating that consumers are pulling back on the spending that drives the economy. Spending missed the 0.4% increase that economists had projected.

“This is the first good CPI report in four months and the market likes it,” said Gary Pzegeo, head of fixed income at CIBC Private Wealth US. “Taken [together with retail sales] this supports a Fed rate cut in the fall. Markets are discounting a cut in September and have moved to price in a second cut by December.”

Main Street vs. Wall Street

The new record for the Dow, made of 30 blue-chip stocks, marks a symbolic shift for investors who — despite elevated interest and inflation rates, geopolitical strife and years of recession warnings — still feel good about the US economy.

It also highlights a notable contrast between sentiment on Wall Street and Main Street.

Consumer sentiment plunged to the lowest level in six months as price increases reaccelerated, according to a University of Michigan survey of consumers released earlier this month.

The recent inflation crisis has given Americans angst about the economy, and recent CNN polls show that many people believe the US economy is headed in the wrong direction. Some even believe the United States is currently in a recession, although there’s no evidence of that.

Overall, 26% of Americans currently say that economic conditions have stabilized, according to CNN data from February. Nearly half of Americans say they believe the economy remains in a downturn.

The first three months of 2024 brought remarkable market momentum. The S&P 500 hit 22 new records between January 1 and April. But, since then, markets have become volatile, as investors began to fear that inflation and interest rates would remain higher for longer.

Wednesday’s CPI report changed that perception.

“This was a good report in the context of three hotter-than-expected [CPI] reports, and it makes it look like potentially those were bumps in the road rather than a really stagnant inflation environment,” Tyler Schipper, economics professor at the University of St. Thomas in Minnesota, told CNN in an interview.

Crossing 40,000



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