Illustration of "Dow Surges to Record High Amid Fed Rate Cut Speculation"

“Dow Surges to Record High Amid Fed Rate Cut Speculation”

The Dow Jones Industrial Average closed 750 points higher on Tuesday, hitting a new record high, as investors are confident that the Federal Reserve will reduce a key interest rate by September.

According to the CME FedWatch tool, which evaluates potential actions of the Federal Open Markets Committee (FOMC), there is a 93.3% probability that the Fed will decrease its key rate by a quarter percentage point to a range of 5% to 5.25% in September, down from the current range of 5.25% to 5.5%.

There is also a 6.7% chance of a half-percentage-point cut in September, reflecting some traders’ belief that the Fed might announce a cut at its meeting in late July followed by another cut in September. These probabilities emerged after a favorable CPI report in June showed that inflation is easing.

At the close of the day, the Dow had risen by 742 points, or 1.85%, to 40,954. The S&P 500 increased by 0.64%, and the Nasdaq saw a 0.2% gain. Small-cap stocks saw substantial gains, with the Russell 2000 reaching a new 52-week high after a 3.4% rise.

However, AI stocks were down on Tuesday morning. Companies such as Nvidia, Advanced Micro Devices, Super Micro Computer, Broadcom, and Micron Technology all experienced losses of about 2%.

In addition, Bank of America and Morgan Stanley released their earnings reports. Bank of America’s stock jumped over 5% after exceeding analysts’ forecasts, while Morgan Stanley’s stock rose by just over 1%. Conversely, shares of Charles Schwab fell more than 10% following a reported decrease in bank deposits.

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