Morgan Stanley’s wealth management business says that the Dow Jones Industrial Average hit a new record high on Monday. This was after positive economic events were seen as “good news” for the stock market again.
The bank Morgan Stanley Wealth Management said in a note Monday that “good is good again.” “Stock markets have found their balance again and are heading back up to all-time highs.”
For the U.S. stock market to become stable, the note said that “a reversal in the negative correlation between market moves and economic news was critical.”
The note says that stocks have recovered from a “rough patch” that lasted from the middle of July to the first week of August. During that time, “market fears over a potential recession and Federal Reserve policy mistake were amplified by yen-carry-trade dynamics.”
Investors are paying close attention to the Federal Reserve’s (Fed) monetary policy. Some are worried that the central bank could cause a recession by keeping interest rates too high for too long.
But since a rate cut by the Fed is “all but certain” to happen in September, Morgan Stanley said that “good news is good again, supporting soft-landing forecasts.” They were talking about recent U.S. economic reports that were better than what Wall Street had expected. The note says that the move was made possible by “stronger retail sales and Institute for Supply Management services PMI data.”
U.S. stocks ended the day strongly higher on Friday after Fed Chair Jerome Powell said “the time has come” for rate cuts in a speech at Jackson Hole. This seemed to give investors hope.
The S&P 500 closed 0.6% below its record high on Friday. It had been going up for two weeks in a row after a selloff in early August caused by a worse-than-expected U.S. jobs report.
The S&P 500 SPX 0.32% fell to 5,616.84 on Monday, but it was still close to its all-time high of 5,667.20, which it hit on July 16. Bloomberg reports that the Dow DJIA 0.16% barely went up on Monday, ending the day at 41,240.52, marking the 23rd record close of 2024.
By raising interest rates, the central bank has been trying to bring inflation down to its goal level of 2% without causing a recession. This is called a “soft landing” for the U.S. economy. Investors think the Federal Reserve will start dropping interest rates at its next policy meeting, which ends on September 18. This is because inflation has gone down a lot and the job market is starting to cool down.
The Fed’s favourite measure of inflation is coming out with new data on Friday. Investors will see data from the personal-consumption-expenses price index for July. Thursday, a new estimate of the growth of the U.S. gross domestic product during the second quarter is set to be announced.
Dow Jones Market Data says that most U.S. stocks went down on Monday. The Dow closed 0.2% higher, the S&P 500 fell 0.3%, and the tech-heavy Nasdaq Composite COMP -0.85% fell 0.9%.
Still, so far in August, all three of the big benchmarks have shown gains.
The Dow has gained 1% this month through Monday, while the S&P 500 has risen 1.7% and the Nasdaq has advanced 0.7%, FactSet data show.
