The Stock Market Had A Strong Showing This Week, Which Drove The Three Major Indices To Fresh Record Highs.
The S&P 500 for its part closed above 5,200 for the first time with a 2.3% gain this week. The Nasdaq Composite jumped 2.9% and the Dow Jones Industrial Average gained 2.0%.
The gains were largely in response to the FOMC policy announcement. The committee voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%. This was expected and was not the reason for increased buying activity.
Buying increased due to the closely-watched dot plot, which is included in the updated Summary of Economic Projections (SEP), showing that the Fed still anticipates three rate cuts this year despite recent inflation readings coming in hotter than expected.
Fed Chair Powell's press conference following the FOMC policy announcement didn't deter the influx of buying. He largely reiterated prior comments, indicating that the Fed needs more evidence that inflation is moving toward the 2% target before cutting rates. Mr. Powell also said that it will be appropriate to slow the pace of asset runoff fairly soon.
Rate cut expectations moved up this week, contributing to the positive bias in the stock market. The implied likelihood of a June cut rose to 75.4% from 58.8% last week, according to the CME FedWatch Tool.
The price action in Treasuries also contributed to the positive bias in the stock market. The 2-yr note yield declined 12 basis point to 4.60% and the 10-yr note yield fell eight basis points to 4.22%.
Mega cap stocks had an outsized impact on index gains.
Only one of the S&P 500 sectors logged a decline -- real estate (-0.4%) -- while the communication services (+4.8%), industrials (+2.9%), information technology (+2.9%), and consumer discretionary (+2.8%) sectors saw the largest gains.
S&P 500: +2.3% for the week / +9.7% YTD
Nasdaq Composite: +2.9% for the week / +9.4% YTD
S&P Midcap 400: +2.3% for the week / +7.5% YTD
Dow Jones Industrial Average: +2.0% for the week / +4.7% YTD
Russell 2000: +1.6% for the week / +2.2% YTD