Stocks gained ground to start the new week, buoyed by hopes the Federal Reserve will start cutting interest rates at its September meeting. The main indexes also got a boost after Fed Chief Jerome Powell struck a dovish tone toward inflation.
Last week's encouraging inflation updates – most notably, the June Consumer Price Index (CPI), which fell for the first time on a monthly basis in nearly two years – helped lift expectations that the Fed will cut rates sooner rather than later.
Indeed, according to CME Group's FedWatch Tool, futures traders are pricing in an 89% chance the Fed will cut rates by a quarter-percentage point in September. This is up from 71% one week ago.
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Powell did not indicate when the central bank would start cutting rates during his early afternoon Q&A session at the Economic Club. However, he did say recent economic data adds "somewhat to [the Fed's] confidence" that it can bring inflation back down to its 2% target.
The next big event on the economic calendar occurs tomorrow morning with the release of the June retail sales report. "Last month's report showed tepid sales, and we will be watching to see if consumers have continued to pull back on spending," says Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.
Apple nabs new record closing high
In single-stock news, Apple (AAPL) shares rose 1.7% to a new record closing high of $234.40 after Bloomberg News said annual revenue in India hit a record high of nearly $8 billion in the 12 months ended March 31.
Also boosting the mega-cap stock was a bullish note from Morgan Stanley analyst Erik Woodring, who said the company's recently announced artificial intelligence (AI) platform, Apple Intelligence, should lead to a multi-year upgrade cycle. As such, Woodring elevated AAPL to a top pick and boosted his price target to $273 from $216.
Goldman Sachs gets an earnings boost
Goldman Sachs (GS, +2.6%) was another booming blue chip stock that closed at a new record high after the big bank disclosed its second-quarter earnings report. GS easily beat analysts' top- and bottom-line estimates for the three-month period and reiterated the dividend hike it announced following last month's stress test results.
"We think GS is poised for higher earnings from investment banking fees given the bank has stated its backlog has increased significantly (and due to the firm's franchise strength in asset management)," says CFRA Research analyst Kenneth Leon (Buy).
DJT stock soars after Trump assassination attempt
Elsewhere, Trump Media & Technology Group (DJT) jumped 31.4% after a weekend assassination attempt against former President Donald Trump. The shooting occurred just ahead of this week's Republican National Convention where Trump earlier today secured his party's nomination for this fall's presidential election.
"Political violence is a risk for markets and we have seen volatility increase in the past few months in equity markets around the world given the elections in India and France," says Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. "Unfortunately, we will have to plan for increased volatility in both stock and bond markets as our election nears given the rancor we have seen."
As for the main indexes, the Dow Jones Industrial Average climbed 0.5% to 40,211 – a new record closing high – the S&P 500 rose 0.3% to 5,631, and the Nasdaq Composite gained 0.4% to 18,472.
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