After a muddled morning, most major indices are in the green heading into the afternoon. Why are stocks up today?
Well, after dealing with some early morning resistance, it appears the S&P 500 is attempting to break through its recent peak. Indeed, the widely watched index is currently trending at a historic high after touching its highest level ever on Wednesday. The S&P is up 0.17% for the day at the time of writing.
The new year has been, by and large, fruitful for stocks as the S&P and Nasdaq Composite are up about 3.5% and 5%, respectively, in the first month of trade.
While the Nasdaq isn’t quite at its November 2021 peak, it’s certainly on track to notch a new apex sometime soon. At the time of writing, less than 3.5% separates the tech-centric index from its highest point.
Why Are Stocks Up Today?
It appears traders are feeling flush after a stronger-than-expected Personal Consumption Expenditures (PCE) report released this morning. Indeed, the Federal Reserve’s preferred inflation gauge came in better than expected, with core inflation falling below 3% for the first time since March 2021.
This has fueled speculation that the Fed may cut rates as early as March, with the inflation battle coming along even better than expected.
Falling interest rates typically encourage more spending and generally stronger economic growth, making the PCE inherently bullish for stocks. Combined with the equally strong Gross Domestic Product (GDP) report released earlier this week, this paints a rosy picture for the economy and stock market.
“All the economic data — both the GDP and PCE — was good this week,” noted Rhys Williams, chief strategist at Spouting Rock Asset Management. “That was comforting to everybody. And I think it does show we’re still in this potential ‘Goldilocks’ landing, where the economy softens a bit but is still positive.”
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
