Thursday, June 13, 2024

Dow Jones Industrial Average hits 40,000 points for first time; UK reality TV stars charged over FX scheme – as it happened

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Dow Jones hits 40,000 points for first time

Boom! The Dow Jones industrial average, America’s much-storied stock index, has hit the 40,000 point mark for the first time, as traders anticipate interest rate cuts.

The Dow, which contains 30 major US companies, nudged a new alltime high of 40,000.54 points in morning trading in New York.

Hypermarket giant Walmart are the top riser on the Dow, up over 6%, after announcing better-than-expected earnings for the first quarter.

Other top risers today include aeroplane manufacturer Boeing (+3%) and conglomerate 3M (+3%).

The rally comes as investors continue to hope that the Federal Reserve will start to cut interest rate this year, after US inflation yesterday dropped to 3.4%.

The US stock market is having a good year, with technology stocks booming on the back of hopes for artificial intelligence systems.

Rania Gule, market analyst at XS.com, explains:

Overall expectations for the stock market remain positive, especially with supportive monetary policy expectations and continued corporate growth, especially in the technology and artificial intelligence sectors.

However, I advise traders here and at this stage to remain cautious of volatility, especially in stocks that have shown significant price fluctuations influenced by social media and retail investor sentiment.

Nevertheless, I believe prevailing economic conditions and policy expectations indicate that the upward trend in major stock indices is likely to continue in the short to medium term.

Today’s rally means the Dow has doubled since the depths of the pandemic selloff in March 2020, when it briefly fell below 20,000 points.

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Key events

Closing post

Time to wrap up….

The Dow Jones Industrial Average passed 40,000 points for the first time on Thursday, powered by strong quarterly results from corporate America and rising bets of interest-rate cuts by the Federal Reserve.

The index has more than doubled since the spring of 2020 when the World Health Organization declared Covid-19 to be a global pandemic. The outbreak shuttered businesses worldwide as the death toll mounted. In its wake came supply chain issues that led to soaring inflation.

The US has staged a remarkable recovery despite widespread predictions of disaster in the face of runaway prices and the Federal Reserve’s aggressive series of interest rate hikes, aimed at tamping down inflation.

On Wednesday, government figures showed that the annual rate of inflation, which peaked at over 9% in June 2022, had slowed to 3.4% in April, down from 3.5% in the previous month.

More here.

And here are the rest of today’s business news stories:

A group of UK social media influencers from reality TV shows including The Only Way Is Essex and Love Island have been charged in relation to promotions of unauthorised investments.

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Roche says obesity drug results ‘highly encouraging’

Julia Kollewe

The weight loss market is heating up, with the Swiss drugmaker Roche reporting that its once-weekly obesity injection delivered almost 19% weight loss in early trials.

Like the popular weight loss treatments from Denmark’s Novo Nordisk and US firm Eli Lilly, Roche’s CD-388 drug is part of a new class of drugs that mimic the action of a gut hormone called glucagon-like peptide 1 (GLP-1) and suppresses appetite. Over 24 weeks, it led to 18.8% weight loss.

This compares with 21% weight loss over 72 weeks for Eli Lilly’s Zepbound, and 15% weight loss over 68 weeks for Novo Nordisk’s Wegovy.

Roche’s share price rose more than 3% today.

Side effects were similar to those experienced by people taking Zepbound and Wegovy, such as nausea and vomiting, described as “mild to moderate gastrointestinal-related adverse events” by Roche.

It acquired the treatment via its $2.7bn acquisition of the Californian biotech Carmot Therapeutics in December.

The company is also trialling the drug in obese people with type 2 diabetes over 12 weeks, with results expected in the second half of this year.

Like Zepbound, the Roche drug works by mimicking GLP-1 and another gut hormone called GIP. This could lead to stronger weight loss and reduction in blood sugar with fewer side effects than drugs such as Wegovy, which is only based on GLP-1.

Levi Garraway, Roche’s chief medical officer and head of global product development, said:

“We are very pleased to see the significant and clinically meaningful weight loss in people treated with CT-388. The results are highly encouraging for further development of CT-388 for both obesity and type 2 diabetes and underscore its potential to become a best-in-class therapy with durable weight loss and glucose control.”

However, Roche did not say how high its weekly doses were and analysts said the company still has a long way to go.

Dan Coatsworth, investment analyst at AJ Bell, says:

“Investors have been pumped up by the latest inflation reading, believing it is cool enough to stir the Federal Reserve into action and cut rates in the near future.

It also helps that quite a few US companies are getting a positive reaction to their latest results, together lifting the general mood around the markets and firing up enthusiasm to make trades.”

The Dow Jones Industrial Average has rallied by around 45% since early November 2020, when Joe Biden beat Donald Trump in the presidential election.

That rather refutes Trump’s claim during a presidential debate in 2020 that the stock market would crash if Biden was elected president.

Left: Trump saying 2020 that “the stock market will crash” if Biden is elected

Right: The Dow just now hitting 40,000 for the first time ever in history pic.twitter.com/qOcyU2J2Hv

— Biden-Harris HQ (@BidenHQ) May 16, 2024

The sight of the Dow hitting the 40k mark today should cheer followers of author David Elias.

Back in 1999, he published. Dow 40,000: Strategies for Profiting from the Greatest Bull Market in History.

That book argued that investors should look to profit from a strong bull market, and outlined various strategies to do it.

At the time, the Dow was trading around 10,000 points, and 40,000 looked a very long way away.

Eias, though, predicted it would hit 40k by 2016 – so he was eight years early….

Ryan Detrick, chief market strategist at Carson Group, points out that investors who ignored gloomy forecasts last year have profited from the stock market rally:

40,000 is a great milestone, but end of the day there isn’t much difference between 39,999 and 40k. Still, this is a great reminder of how far we’ve come. Think about how many people were talking about recessions and bear markets all of last year, now we are once again back to new highs. Investors who were patient and ignored all the scary headlines were once again rewarded, just as they have been throughout history.

Can stocks keep going? Detrick thinks they can, and predicts markets will show more strenth this year.

He explains”:

Earnings continue to surprise to the upside, balance sheets for corporate American are in great shape, while the consumer might have some cracks, but is still strong thanks to a very healthy employment backdrop.

Then consider lower rates are likely coming, thanks to inflation that should drastically improve the second half of this year. It is an election year, so expect some bumps, but overall the bull market that stared in October 2022 is alive and well in our view.

Hitting the 40,000-point mark is a milestone that could lift spirits on Wall Street.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, explains in a research note today:

“Breaking the 40,000 barrier is a big psychological boost for the bulls as round numbers hold special significance in people’s hearts and minds.

“We are in a Bull Market and people are showing some irrational exuberance (meme stocks) and dismissing bad news (slowing retail sales) and focusing on good news (slightly slowing inflation).”

But the meme stock exuberance appears to be fading today. Electronics retailer Gamestop have tumbled by 23.8% this morning – earlier this week it jumped by 100%, in turbulent trading….

This was the scene outside the New York Stock Exchange (NYSE) this morning, as the Dow headed to a new alltime high Photograph: Spencer Platt/Getty Images

The new record for the Dow highlights a notable contrast between sentiment on Wall Street and Main Street, points out CNN, adding:

Consumer sentiment plunged to the lowest level in six months as price increases reaccelerated, according to a University of Michigan survey of consumers released earlier this month.

Weak industrial production data helped give the Dow a push to the heady heights of 40,000 points today.

Federal Reserve data released just before the New York stock market opened showed that US industrial production stagnated in April, while manufacturing output fell 0.3%, held back by motor-vehicle production.

This is not encouraging news; but in the tipsy-topsy world of Wall Street, bad news is good, as it may encourage the Fed to cut rates soon.

John Lynch, chief investment officer at Comerica Wealth Management, has hailed the Dow’s drive to 40,000 points, telling CNBC:

“This achievement is a testament to the powers of capital formation, innovation, profit growth, and economic resilience.”

[although, as flagged earlier, enthusiasm around artificial intelligence and hopes that central banks will ease monetary policy are also factors…]

Photograph: Google

Dow Jones hits 40,000 points for first time

Boom! The Dow Jones industrial average, America’s much-storied stock index, has hit the 40,000 point mark for the first time, as traders anticipate interest rate cuts.

The Dow, which contains 30 major US companies, nudged a new alltime high of 40,000.54 points in morning trading in New York.

Hypermarket giant Walmart are the top riser on the Dow, up over 6%, after announcing better-than-expected earnings for the first quarter.

Other top risers today include aeroplane manufacturer Boeing (+3%) and conglomerate 3M (+3%).

The rally comes as investors continue to hope that the Federal Reserve will start to cut interest rate this year, after US inflation yesterday dropped to 3.4%.

The US stock market is having a good year, with technology stocks booming on the back of hopes for artificial intelligence systems.

Rania Gule, market analyst at XS.com, explains:

Overall expectations for the stock market remain positive, especially with supportive monetary policy expectations and continued corporate growth, especially in the technology and artificial intelligence sectors.

However, I advise traders here and at this stage to remain cautious of volatility, especially in stocks that have shown significant price fluctuations influenced by social media and retail investor sentiment.

Nevertheless, I believe prevailing economic conditions and policy expectations indicate that the upward trend in major stock indices is likely to continue in the short to medium term.

Today’s rally means the Dow has doubled since the depths of the pandemic selloff in March 2020, when it briefly fell below 20,000 points.

Share

Updated at 

Over on Wall Street, the main share indices have hit new all-time highs.

The Dow Jones industrial average is on the brink of 40,000 points; its currently up 85 points or 0.2% at 39,993.

Looks like #DowJones #DJIA is going to break 40,000 today for the first time ever. US benchmark currently 39,974.

— Ronnie (@Ronmarkets) May 16, 2024

Yesterday’s drop in US inflation continues to cheer investors, who are hoping the Federal Reserve will cut interest rates this year – perhaps twice or more.

Bank of England to cut rates in August, predicts majority of economists

A majority of City economists believe the Bank of England will make its first cut to UK interest rates since 2020 in August, although a significant minority think it could act in June.

A poll of 71 City experts conducted this week by Reuters found that 38 predicted the BoE will lower Bank rate to 5%, from 5.25%. at its meeting in the first week of August.

But 31 opted for the BoE’s next meeting, in June, while two thought it would wait until September.

Bank rate is currently a 16-year high; last week, the BoE left borrowing costs unchanged, but governor Andrew Bailey hinted that rates could be cut faster than the markets expect.

Quick reminder of the Bank of England #MPC dates over the rest of the year… 👇

There are 5 meetings left, so a 1/4 point cut at each would take rates to 4%.

Even if they hold until August, still time for 3 cuts before (likely) election on 14 November.#BankofEngland pic.twitter.com/zlV0XZ9aNf

— Julian Jessop 🇬🇪 FRSA (@julianHjessop) May 16, 2024

Back in the City, BT’s shares are on track for their best day on record after the company announced a new cost-cutting drive and lifted its dividend.

BT’s shares are up 16% at 131p, which would be the biggest jump in at least 20 years.

That’s a blow to the speculators who have been short-selling BT in recent weeks, as it’s shares are now the highest since last December.

A number of short sellers took positions in the group after its shares plummeted by 45% over the last five years, from 208p in May 2019 to as low as 105p this year.

BT’s new chief executive Allison Kirkby has declared that: “I always love to squeeze the shorts . . . and prove them wrong” (the FT reports).

Social media influencers should take note of the charges brought against several reality TV stars by the FCA today, says Sushil Kuner, financial services regulatory lawyer at law firm Gowling WLG.

This action follows hot on the heels of the FCA’s recently published guidance on financial promotions on social media which warned influencers who promote financial products or services without having those promotions approved by an FCA authorised person that they may be committing a criminal offence. This action demonstrates the FCA’s commitment to protect consumers from potentially harmful promotions made by influencers who often have significant followers and reach.

Social media influencers should take note of this clear warning from the FCA that it will take action where it sees them unlawfully promoting financial products and services, with criminal prosecution being a real threat.

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