Dow Hits Milestone 40,000 as Rate-Cut Hopes Fuel Rally

The Dow reached an all-time high of 40,000 for the first time Thursday, as investor hopes of interest-rate cuts by the Federal Reserve were buoyed by data showing inflation slowdown, as well as strong corporate earnings results.

The blue-chip index has recovered from its October 2022 lows, powered by resilient U.S. economic growth despite steep rate hikes by the Fed.

"The current environment seems to focused on what the Fed may or may not do, given that we had started the year with the expectation that the Fed will cut rates up to six times but that moved down more recently to one or two times," said Silas Myers, chief executive and portfolio manager at Mar Vista Investment Partners in Los Angeles.

Investors are betting on two quarter-point interest rate cuts from the Federal Reserve this year, and estimate a 70% chance of the first reduction in September, according to the CME FedWatch Tool.

All three Wall Street indexes had reached record closes on Wednesday after data showed a smaller-than-expected rise in consumer prices in April, indicating that inflation had resumed its downward trend.

Data on Thursday also showed the number of Americans filing new claims for jobless benefits fell last week, though labor market conditions remain fairly tight even as job growth is cooling.

"The more information you get out there shows there's slowing inflation and yet employment is holding up, this has really put a floor or even ignited this rally that we've seen in the past couple of days," Myers added.

According to preliminary data, the S&P 500 lost 10.28 points, or 0.19%, to end at 5,297.87 points, while the Nasdaq Composite lost 42.37 points, or 0.26%, to 16,698.32. The Dow Jones Industrial Average fell 34.66 points, or 0.09%, to 39,873.34.

Walmart rose after the retail giant raised its fiscal 2025 sales and profit forecast, betting on easing inflation to further boost demand for essentials.

Deere dropped after the farm equipment maker trimmed its annual profit forecast for the second time.

U.S.-listed shares of Swiss insurer Chubb gained after Warren Buffett's Berkshire Hathaway revealed a $6.7 billion stake in the company. GameStop and AMC Entertainment slid, with the so-called "meme stocks" extending Wednesday's losses following a two-day rally sparked by the social media return of "Roaring Kitty" Keith Gill.