This week's extraordinary surge in stock prices is driven by compelling factors.
Last week, the S&P 500 and Dow reached all-time highs following the Federal Reserve's decision to reduce interest rates by 0.5%, signaling a shift from the previous intense hiking period that pushed rates to a 23-year peak.
CNN's Fear & Greed Index, which monitors seven indicators of market sentiment, indicated a "greed" level.
Investors have celebrated robust economic data throughout the week. On Thursday, the S&P 500 notched its 42nd record-breaking closing of 2024, while the Dow achieved its 31st record-breaking close of 2024 the day prior. All three main indices are looking at a positive week, with the Dow up 0.9%, the S&P 500 up 0.7%, and the Nasdaq Composite climbing 1%.
The Personal Consumption Expenditures price index, which the Federal Reserve considers its preferred inflation gauge, showed that prices for goods and services increased by 2.2% year-over-year in August, down from July's 2.5%. This figure fell below economists' predictions, moving closer to the Fed's 2% inflation target.
This week, fresh data provided additional incentive that the economy is in good standing. The third estimate for second-quarter gross domestic product revealed that the US economy grew at a strong 3% rate compared to the previous year.
Gregory Daco, EY's chief economist, commented that "it appears that a soft landing scenario is gradually taking shape, which was the dream of only the most optimistic a short while ago." A soft landing denotes a situation where inflation decreases without triggering a recession.
In addition, the typical 30-year fixed mortgage rate decreased to its lowest level since September 2022 this week, as per Freddie Mac data. This improvement is expected to bring some respite to home buyers struggling with the current housing market. Mortgage refinancing requests also surged by 20% last week, according to Mortgage Bankers Association statistics.
Investors will soon focus on the upcoming September job report due in just a few days. Employers are expected to have added around 142,000 jobs in August, which is an improvement over July's weak results, while the unemployment rate dropped to 4.2%. This news provides a hopeful sign that the labor market is continuing to perform well. As the Fed concentrates on maintaining a robust labor market, the job report may provide clues for its next move at its November meeting.
In the meantime, tech stocks have continued to climb this week due to optimism surrounding rate cuts and strong financial results from companies like Micron. Nvidia shares grew by 3.9%, Tesla shares increased by 8.6%, and Meta Platforms shares added 1%.
In China, stocks advanced after the central bank enacted a range of measures to invigorate its sluggish economy. These measures include the reduction of interest rates.
Crude oil prices slipped on Friday and were approaching a weekly decline. The current national average price for gas is around $3.22, according to GasBuddy. The Financial Times revealed on Thursday, citing unnamed sources, that Saudi Arabia might abandon its goal of $100 a barrel for oil.
Gold futures retreated from their latest record high reached on Thursday, marking another record-breaking achievement in a series of highs this year. Gold's price surge has been driven by central banks' increased purchasing of the precious metal and concerns about the overall health of the US economy.
Bitcoin also saw a price increase this week, rising by 4.7%.
CNN contributed to this report with content from Bryan Mena and Elisabeth Buchwald.
Investors are actively looking for opportunities in the current business environment, with the potential for profitable investing due to the Fed's rate cuts and robust economic data. The decreased 30-year fixed mortgage rate has brought some relief to home buyers struggling in the housing market, leading to a surge in mortgage refinancing requests.
