Stock Market Today: S&P 500 closes at record, Dow up 260 points after upbeat economic data (2024)

Thursday's Top Reads

U.S. stocks closed higher, with the S&P 500 scoring another record close as investors await an inflation update on Friday.

Traders were dialing back expectations for how big of an interest-rate cut could be on the docket at the Federal Reserve's November meeting, with the odds shifting in favor of a cut of 25 basis points on Thursday after a string of economic data pointed to resilience in the U.S. economy.

While the labor market remains the biggest focus, investors will be keeping an eye on Friday's inflation data via the Fed's preferred PCE index, which is likely to show inflation cooling futher, backing additional rate cuts.

Money-market funds added another $120.8 billion in the past week, pushing their total assets to $6.42 trillion, according to the Investment Company Institute.

Both retail and institutional funds added to the inflows, according to the data, marking a reversal of the previous week's institutional outflows.

Cash yields have been declining since the Federal Reserve last week kicked off its pivot to lower interest rates, cutting its benchmark policy rate by a big 50 basis points.

The Crane 100 Money Fund Index was pegged at a yield of 4.78% on Thursday. Cash-like money-market funds had offered closer to 5% yields in the past two years.

Resilient U.S. economic data could lead to a slower Fed rate-cutting cycle going forward, while a sharp deterioration in the labor market could trigger a series of large cuts that would bring cash yields down more quickly.

The S&P 500 was headed for its 42 record close of the year on Thursday, pushed higher by a surge in stocks of companies that make materials used to support manufacturing.

The S&P 500 was up 19 points, or 0.3%, near 5,741, at last check.

If that level holds, it would eclipse its prior record finish of 5,732.93 set on Tuesday, according to Dow Jones Market Data.

The S&P 500's materials sector was up 1.8% on Thursday and up 3.4% on the week so far, according to FactSet.

The Federal Reserve will likely cut interest rates by a modest 25 basis points in November given the U.S. economy's 3% annual growth rate in the second quarter, according to Christian Scherrmann, U.S. economist at DWS.

In addition to the GDP revisions, corporate profits were higher, as were personal savings, suggesting "more dry powder among consumers" given the stable inflation backdrop of late, Scherrmann wrote in emailed comments.

While that could provide some comfort to the Fed, labor-market data remain the big item that will guide its next move on rates. "We believe that, at least for now, the current dataset only warrants a 25bp cut in November," he said.

As the following chart from data-solutions provider BondCliQ Media Services shows, spreads on the company's two more liquid bonds have tightened significantly since the news first broke. The yellow arrow highlights the move.

Materials stocks were in the driver's seat Thursday, with the sector leading S&P 500 gainers with a 2% gain.

That's good enough for its best day since Nov. 14 and to put the sector on track for an all-time closing high, according to Dow Jones Market Data. The Materials Select Sector SPDR ETF is leading sector ETFs with a 3.2% gain for the week but has been a bit of a laggard for the year to date, with a gain of 13.4% versus a 20.4% gain for the S&P 500-tracking SPDR S&P 500 Trust.

Shrinking cash yields and a steady bond market could be a tailwind for markets.

That's Richard Steinberg, chief market strategist at the Colony Group, saying that Wall Street estimates for the S&P 500 to hit 6,000 could benefit from investors moving out of cash in the wake of the Federal Reserve's first rate cut in four years.

"But it's going to have to be a perfect storm," Steinberg said, adding that bond yields will need to fall to help push stocks higher, particularly after the big rally in "unloved" equity sectors in recent weeks.

Bonds could remain volatile, however, with jitters around November's presidential election, potential changes to tax policies and expectations for more deficit spending, he said.

The gap between two key plots on the Treasury yield curve was getting smaller on Thursday following a batch of mostly positive economic data.

The policy-sensitive 2-year Treasury yield was trading around 3.61% on Thursday, climbing from a roughly 3.55% one-year low set earlier in the week, according to Dow Jones Market Data.

The Treasury yield curve turned positive in early September after its longest stretch ever in inverted territory, sending a fresh recession signal. The 10-year Treasury yield's spread relative to the 2-year rate was 18 basis points on Thursday, according to Dow Jones Market Data, based on preliminary figures.

It touched 22 basis points Wednesday, its highest level since June 8, 2022, according to Dow Jones Market Data. It isn't clear if this inversion will end up being a false recession signal or not.

Gold futures finished at another record high Thursday, up for a seventh consecutive session — the longest winning streak since April, with analysts attributing the metal's strength to China's economic stimulus plans and safe-haven demand.

On Comex, December gold rose $10.20, or 0.4%, to settle at $2,694.90 an ounce after climbing to as high as $2,708.70, the highest intraday level on record for a most-active contract.

"Technically, gold is still in a strong uptrend, so it's tough to predict just how high the metal could climb," said Fawad Razaqzada, market analyst at City Index and FOREX.com, in market commentary. "However, be prepared for at least a short-term pullback or consolidation. Once gold retraces a bit, it could continue its upward march towards my long-term target of $3,000."

Bitcoin rose 3.5% on Thursday to above $65,000, after Bloomberg on Wednesday reported that China’s government was considering a 1 trillion yuan ($142 billion) capital injection into the country’s big banks to encourage lending after the People’s Bank of China revealed a swathe of stimulus measures on Tuesday.

The largest cryptocurrency rose to as high as $65,811 on Thursday, its loftiest level since July 31, according to Dow Jones Market Data.

Bitcoin is up 55.4% year to date, while it is still down 11.6% from its all-time high at $73,798 reached in March.