The Dow Jones Industrial Average reset its record high on Friday (Saturday AEST), bolstered by gains from Merck and Salesforce, as Kevin Warsh was sworn in as the new chairman of the US Federal Reserve. At the close in New York, the Dow climbed 0.6 per cent to 50,579.70, after an earlier peak of 50,830.24. The S&P 500 recorded its eighth consecutive week of gains, rising 0.4 per cent to 7473.47, while the Nasdaq Composite edged up 0.2 per cent to 26,343.97. Apple Inc., a multinational technology company renowned for designing, manufacturing, and marketing consumer electronics, saw its shares close at a record high valuation of $US308.82. Its prominent products include the iPhone, Mac, and iPad.
This robust performance in equities emerged despite money markets fully pricing in a Federal Reserve rate increase by December and challenging economic data. Hours before Mr Warsh took office, the University of Michigan reported US consumer sentiment fell to a record low in May. Long-term inflation expectations also notably worsened, with consumers anticipating prices to rise an annualised 3.9 per cent over the next five to 10 years – the highest in seven months – partly attributed to the Iran war. Federal Reserve Governor Christopher Waller, speaking in Frankfurt, indicated his support for making it clear the Fed’s next interest rate move was equally likely to be an increase as a cut.
Mr Waller articulated his current stance of patience in holding rates until the war’s broader impact becomes clearer, but warned a future rate hike would not be ruled out if inflation did not begin to slow soon. “Inflation is not headed in the right direction,” he stated, advocating for removing “easing bias” language from policy statements. This willingness of traders to add to long positions, even ahead of a three-day US holiday weekend, suggests they are unwilling to risk missing a potential “peace-dividend rally,” according to Steve Sosnick at Interactive Brokers. For the Australian market, ASX 200 futures finished down 58 points or 0.7 per cent to 8627, pointing to a soft start for the week, with local attention turning to April CPI data expected around 4.4 per cent headline inflation.
