Dow scales record high on hopes of Fed rate cuts, trade deals

Audio By Carbonatix

Enlarge

(Reuters) -The Dow Jones Industrial Average hit an all-time intraday high on Friday, making it the last of the three major U.S. indexes to clinch a record in Wall Street’s rally fueled by the prospect of a looser monetary policy, easing trade tensions and upbeat corporate earnings.

The Dow surpassed the previous peak of 45,073.63 touched on December 4, helped by a jump in UnitedHealth Group shares after Warren Buffett’s Berkshire Hathaway revealed a new investment in the health insurer.

Counted among the oldest and most followed indexes, the Dow tracks the performance of 30 U.S.-listed large-cap stocks.

The blue-chip index is price-weighted rather than market-cap-weighted, differentiating it from indexes such as the S&P 500, for which companies with larger market values carry the most weight.

The Dow’s gains have been propelled by a solid year-to-date performances from Wall Street bank Goldman Sachs, tech giant Microsoft and industrial equipment maker Caterpillar.

Chip designer and AI champion Nvidia, which became the first publicly listed company to clinch $4 trillion in market capitalization, has also aided the Dow’s rise. The stock has gained more than 30% this year.

The S&P 500 and the Nasdaq Composite reached all-time highs late June, thanks to renewed AI enthusiasm, hopes of U.S. trade deals and rising bets on interest rate cuts, which helped drive a turnaround in U.S. stocks from a sharp rout earlier this year.

The Dow, however, has lagged in reaching record highs, as limited exposure to AI names and the underperformance of companies such as UnitedHealth Group and Salesforce restricted its overall increase.

The Dow has jumped more than 20% since hitting this year’s lowest in April when U.S. President Donald Trump announced sweeping “reciprocal tariffs” to rebalance the global trade order in favor of the United States.

After a series of U.S. trade agreements with the UK, Japan, and the European Union, investors are certain that a worst-case global recession scenario can be avoided.

Meanwhile, a weak labor market report for July prompted traders to increase their bets on an interest rate cut as early as September.

Trump’s moves to shake up the Federal Reserve leadership – including an interim pick for a Fed governor post and an expanded search to replace Chair Jerome Powell next year with someone willing to lower interest rates – have also added to rate cut bets.

(Reporting by Nikhil Sharma, Pranav Kashyap and Shashwat Chauhan in Bengaluru; Editing by Shinjini Ganguli)