The Dow Jones Industrial Average has reached a new high, breaking the 40,000 mark on the strength of gains in companies like Home Depot and Caterpillar. This surge comes as investors are starting to shift their focus to stocks outside of the technology sector. The Dow gained an impressive 456 points, or 1.1%, to set a new record. Home Depot saw a nearly 3% increase, bringing its weekly gain to nearly 8%, while Caterpillar added 1.8%. The S&P 500 also experienced a 1.2% increase, surpassing the 5,600 level after briefly falling below that mark earlier in the week. The Nasdaq Composite saw gains of 1.4%.
Thursday marked a significant shift in the market as investors began selling off their Big Tech holdings, leading to the S&P 500’s worst day since late April. Nvidia, in particular, faced a 5.6% decline. Despite this, the Dow managed to outperform the other major averages, edging up by 0.08% during the sell-off. This trend continued into Friday, with investors showing interest in industrial companies amid hopes of a Federal Reserve rate cut in September. The Dow closed the week with a 1.8% increase.
A key catalyst for the market movement was a consumer price index report released on Thursday, showing a 0.1% decline in June. This report, along with Federal Reserve Chairman Jerome Powell’s testimony, served as a reminder to investors that there are other factors beyond the tech sector influencing the market. As David Russell, TradeStation’s global head of market strategy, noted, the market is driven by more than just the AI growth story. Other sectors, such as utilities, are also poised to benefit from rate cuts and other catalysts.
The Russell 2000 Index saw a more than 6% increase for the week, with Friday alone contributing a 1.5% gain. This surge reflects investors’ optimism about a so-called soft landing for the broader economy, particularly benefiting smaller companies. Even as banks reported mixed second-quarter earnings results, the market remained resilient. JPMorgan shares were down 1%, despite posting higher-than-expected revenue, while Citi saw a 2% dip despite beating revenue targets. Wells Fargo, on the other hand, saw a 6% drop after falling short on net interest income expectations in the second quarter.
Despite a slightly higher-than-expected reading on wholesale inflation, Wall Street largely brushed off those figures in favor of focusing on the previous day’s consumer prices report, which indicated slowing inflation. Nvidia bounced back with a 3% increase on Friday, showcasing investors’ continued interest in tech names. The S&P 500’s 18% year-to-date gain has largely been driven by the technology sector, with technology and communication services stocks both up around 20% for the year. This dominance highlights the continued influence of tech companies on the overall market performance.
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