The Dow Jones Industrial Average surged by 750 points on Tuesday, closing at a new record high. This increase reflects growing investor confidence that the Federal Reserve will cut a key interest rate by September.
Amazon’s Prime Day has so far resulted in the largest U.S. e-commerce day of 2024, thanks to the first half of its 48-hour sales event.
According to CME FedWatch, a tool by CME Group that tracks the Federal Open Markets Committee’s (FOMC) actions, there is a 93.3% likelihood that the Fed will reduce its key interest rate by a quarter percentage point to a range of 5% to 5.25% in September, down from the current 5.25% to 5.5%.
The tool also shows a 6.7% probability of a half-percentage-point cut in September. This speculation includes some traders’ belief that the Fed might announce a rate cut both in its July and September meetings. These probabilities are influenced by the June Consumer Price Index (CPI) report indicating cooling inflation.
By the end of the day, the Dow had risen by 742 points, or 1.85%, reaching 40,954. The S&P 500 increased by 0.64%, and the Nasdaq ascended by 0.2%. Small-cap stocks also saw a boost, pushing the Russell 2000 to a new 52-week high with a 3.4% gain.
Conversely, AI stocks experienced a decline on Tuesday morning. Companies like Nvidia, Advanced Micro Devices, Super Micro Computer, Broadcom, and Micron Technology saw their shares drop by around 2%.
In earnings news, Bank of America and Morgan Stanley released their reports. Bank of America’s stock surged by over 5% following earnings that surpassed analysts’ expectations, while Morgan Stanley’s stock saw an increase of just over 1%. However, shares of Charles Schwab plummeted more than 10% due to a reported decrease in bank deposits at the largest publicly traded U.S. brokerage.