MORE good news for your 401(K)! Dow and S&P both hit record highs AGAIN as analysts say rate cut in May is 90% certain - after Fed's key measure of inflation is lowest in almost 3 years
- Dow Jones was trading at around 38,200 at 11am ET - after hitting record high
- Move up for indexes came after lower than expected core inflation figure
- Markets expect interest rate cut in May - a boost for stocks as it means consumers will spend more and businesses have cheaper borrowing
Stocks jumped today after the Federal Reserve's preferred inflation gauge showed moved closer to the central bank's goal of cutting price growth to 2 percent.
Prices not rising as much as they were is good new for your weekly shop - but it has other benefits too.
Falling inflation gives share prices a boost too, which is great for Americans' 401(K) balances.
Stocks markets like lower inflation because it increases the chances the Fed will cut interest rates - which encourages consumers to spend and also makes it cheaper for businesses to borrow money.
The Dow Jones was hovering aroud 38,200 and the S&P 500 above 4,900 at 11am ET - both hitting record highs.
Traders now see a 90 percent likelihood of the Fed delivering its first rate cut in May, as per CME Group's FedWatch Tool, from earlier expectations in March. One analyst said 'there is plenty of scope for the Fed to start cutting interest rates soon'.
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![Customers wait for orders at a grocery store in Wheeling, Ill., Friday, Jan. 19, 2024. On Friday, the Commerce Department issues its December report on consumer spending. (AP Photo/Nam Y. Huh)](https://i.dailymail.co.uk/1s/2024/01/26/13/80504425-13010357-Customers_wait_for_orders_at_a_grocery_store_in_Wheeling_Ill_Fri-a-27_1706276433362.jpg)
Customers wait for orders at a grocery store in Wheeling, Ill., Friday, Jan. 19, 2024. On Friday, the Commerce Department issues its December report on consumer spending. (AP Photo/Nam Y. Huh)
The core 'personal consumption expenditures index' rose by 0.2 percent month-on-month and by 2.9 percent on an annual basis in December - lower than the 3 percent expected.
The inflation figures today came after more good news yesterday, when it was revealed the US economy grew much faster than expected in the final three months of last year, trouncing expectations as consumers and businesses continued to spend.
For the average American, their main exposure to the stock market is likely in their retirement plan, as most 401(K) accounts have some money invested in these benchmark indices.
Stocke rallying - as they have this year - is good news as it means their portfolios are likely recovering substantial losses from 2022, when the S&P 500 closed out the year down 20 percent.
America easily missed going into recession - which many analysts had forecast was inevitable.
Today's core inflation figures sparked a stock market rally - as traders think the Fed is now likley to cut rates soon as the figures gets close to its targets.
'The bigger picture is that evidence of a durable return in inflation to the Fed's target is mounting,' Pantheon Macroeconomics analysts said in a note, expecting the inflation data to trigger a 150-basis-point in rate cuts this year.
'Core PCE inflation has been running at an annualized pace in line with the Fed's 2 percent target for seven months now,' Capital Economics deputy chief US economist Andrew Hunter said in a note to clients.
'This reiterates the message that there isn't really any 'last mile' of disinflation still to achieve and that, even with real economic growth still resilient, there is plenty of scope for the Fed to start cutting interest rates soon.'
The S&P 500 closed at an all-time high for a fifth straight session on Thursday after data reflecting strong fourth-quarter U.S. economic growth shrugged off dire predictions of a recession in the aftermath of the Fed's rapid rate hikes.
cted to keep its policy rate unchanged at the current 5.25 percent to -5.50 percent range at its meeting next week. Since March 2022, the Fed has raised its benchmark overnight rate by 525 basis points.
Easing inflation is boosting household purchasing power, helping to drive consumer spending and the overall economy.