The Dow Jones Industrial Average (DJIA) rallied by 450 points on Wednesday, pushing the index back above 42,000 in a robust recovery from earlier losses this week. Investors appeared unfazed by softer-than-expected U.S. Wholesale Inventories data and cautiously hawkish comments from Dallas Federal Reserve President Lorie Logan.
The rally extended the Dow’s recent bullish momentum, with the index now up roughly 12.75% year-to-date, buoyed by optimism around corporate earnings and resilient consumer spending. Wednesday’s gains came despite the fact that August Wholesale Inventories grew by just 0.1%, below expectations of 0.2%, reflecting sluggish inventory growth in non-durable goods. On the flip side, durable goods inventories rose by 0.3%, surpassing forecasts and signaling strength in certain sectors of the economy.
Despite these mixed signals, market participants remain focused on the broader picture, betting that the Federal Reserve will proceed cautiously with future rate cuts. Lorie Logan, President of the Dallas Fed, warned that inflation risks still linger despite significant progress toward the central bank’s 2% inflation target. While many investors have been eager for more rate cuts following September’s 50-basis-point reduction, Logan’s comments served as a reminder that the Fed is unlikely to move too quickly.
The FOMC’s September Meeting Minutes, released on Wednesday, reinforced this caution. Most Fed officials supported the recent 50 bps cut, though a few leaned toward a more modest 25 bps reduction, highlighting the ongoing debate within the Fed about how aggressively to ease monetary policy. The Minutes reiterated that future decisions would be data-dependent, leaving the door open for adjustments based on inflation and employment figures ahead of the Fed’s next meeting in November.
In the rate markets, traders are pricing in a 25 bps rate cut in November, though the probability of the Fed holding rates steady has risen to 15%, according to the CME’s FedWatch Tool. This cautious optimism has underpinned the equity markets, with the Dow Jones outperforming its moving averages and maintaining momentum near record highs.
Wednesday’s rally saw nearly all 30 stocks in the Dow in positive territory, with IBM and Nike both surging over 2%. IBM closed at $238 per share, while Nike climbed above $82.50. However, Boeing continued to struggle amid ongoing labor strikes, exacerbating concerns over the company’s future performance as its workforce rejected a new contract proposal.
The Dow Jones has now risen 6.25% from its September lows and shows no signs of slowing as investors remain bullish on the U.S. economy, despite mixed economic data and continued Fed uncertainty.
