In a significant development for the financial markets, the Dow Jones Industrial Average marked a new record closing high on Friday as investors analyzed remarks made by two Federal Reserve governors. The Dow increased by 0.1% to 42,063.4 points. In contrast, the Nasdaq Composite experienced a decline of 0.4%, closing at 17,948.3, and the S&P 500 fell by 0.2% to 5,702.6, moving away from the all-time high reached just the day before.
Sector-wise, utilities emerged as the top gainers, while industrials and materials suffered the steepest losses. Over the course of the week, the Nasdaq gained 1.5%, and the S&P 500 saw a rise of 1.4%, while the Dow recorded an increase of 1.6%. On Wednesday, the Federal Open Market Committee (FOMC) announced a reduction in the benchmark lending rate by 50 basis points, adjusting it to a range of 4.75% to 5%.
Fed Governor Michelle Bowman expressed her preference for a more conservative 25-basis-point cut during the recent meeting, emphasizing the importance of recognizing notable advancements in lowering inflation rates, even as core inflation hovers around or above 2.5%. Bowman articulated a concern that a larger policy action might be perceived as a premature declaration of victory regarding the Fed's price stability mandate.
Additionally, Fed Governor Christopher Waller mentioned his support for the 50-basis-point reduction, suggesting that inflation is softening much quicker than he had anticipated, according to reports. The FOMC's Summary of Economic Projections, released on Wednesday, indicated that policymakers have revised their median federal funds rate outlooks downward for the years 2024 through 2026, while increasing their projections for the unemployment rate.
"After a brief period of digestion, investors seem to be applauding the Fed's 'recalibration' of policy," stated Stifel in a note to clients. The note further suggested that after an initial aggressive reduction of 50 basis points, the market appears to be anticipating a quicker return to accommodative policies rather than a mere resetting from restrictive to neutral.
In the bond market, the US two-year yield slightly dropped by 1.3 basis points to 3.59%, whereas the 10-year yield remained stable at 3.74%. Turning to company-specific news, Constellation Energy, known by its ticker symbol $CEG, has entered into a 20-year power purchase agreement with Microsoft, represented as $MSFT.
This deal will facilitate the restart of the Three Mile Island nuclear plant in Pennsylvania, aimed at supplying carbon-free energy to power Microsoft's data centers. Following this announcement, shares of Constellation surged by 22%, marking it as the top performer on both the S&P 500 and the Nasdaq, while Microsoft shares fell by 0.8%.
Nike, under the ticker $NKE, was recognized as the leading gainer on the Dow and performed notably well on the S&P 500, posting an increase of 6.8%. Late Thursday, the company disclosed the upcoming retirement of CEO John Donahoe next month, with former executive Elliott Hill set to return and take the helm.
In a different sector, Qualcomm, abbreviated as $QCOM, is reportedly making a bid to acquire rival chip manufacturer Intel ($INTC), as stated by The Wall Street Journal. Following this news, Intel shares surged by 3.3%, positioning themselves among the top gainers on the Dow and the Nasdaq, while Qualcomm's stock experienced a decline of 2.9%.
On the other hand, FedEx, tickered as $FDX, faced significant challenges and was labeled the worst performer on the S&P 500, plummeting by 15%. This decline followed the company's announcement of unexpected year-over-year declines in its fiscal first-quarter results, attributed to sluggish demand trends.
In the commodities market, West Texas Intermediate crude oil recorded a minor decline, trading at $71.92 per barrel, while gold climbed by 1.2% to reach $2,645.70 per troy ounce. Conversely, silver saw a slight decrease of less than 0.1%, priced at $31.41 per ounce..