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The stock market sets new records as Wall Street's confidence in the economy grows

JUANA SUMMERS, HOST:

The stock market has been blasting through record after record. The S&P 500 recently crossed a new threshold, the 5,000 mark, for the first time ever. NPR's David Gura explains what's driving this record-setting run.

DAVID GURA, BYLINE: We're still early in 2024, but the S&P 500 has kept climbing, building on last year, when it rose by an eye-popping 24%. The index includes many of the largest and best-known companies in the world.

LEE FERRIDGE: It's happened because U.S. data has been so strong.

GURA: Lee Ferridge is the head of macro strategy at State Street Global Markets. Inflation is dramatically lower than what it was in June of 2022, when it hit a four-decade high. And last month the U.S. economy added more than 350,000 jobs.

FERRIDGE: The U.S. economy is a juggernaut at the moment. If that continues, which I think it will, with that benign inflation backdrop, then there's every reason to think this rally can continue.

GURA: This is somewhat surprising. A year ago, there weren't many professional investors who anticipated Wall Street would see this kind of rally. Lori Calvasina is the head of U.S. equity strategy at RBC Capital Markets.

LORI CALVASINA: So look. Equities have gotten off to a very strong start to the year, which has surprised a lot of people - I'm not going to lie - myself included.

GURA: There was a lot of concern at the beginning of 2023 about a potential recession. The Federal Reserve was in the middle of raising interest rates very aggressively to slow down the economy. But remarkably, we've continued to see good data, and that's why sentiment has shifted. Now, Wall Street is trying to figure out when policymakers will be comfortable enough to cut interest rates. There was a lot of hope that could happen at their next meeting in March, but Fed Chair Jerome Powell ruled that out at his last news conference.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: I don't think - that's probably not the most likely case or what we would call the base case.

GURA: That didn't seem to disappoint Wall Street too much. And State Street's Lee Ferridge says that's because investors recognize the data are pointing in the right direction. They're convinced policymakers are going to begin bringing down interest rates in the not-too-far-off future, even if it is a little bit later than they first anticipated.

FERRIDGE: The start has just been delayed, and that's fine because it's been delayed because of better growth.

GURA: Wall Street has also gotten a boost from publicly traded companies that are updating investors on their recent performance. Many of them, especially in tech and energy, have done better than expected. Now, there are many things that could upend this rally, including economic turmoil in China and a widening conflict in the Middle East, along with the data in the U.S., according to Ferridge.

FERRIDGE: I can tell you the one thing that will end this rally and upset this rally - is any sign of inflation coming back.

GURA: But for now, investors are feeling confident about where the economy and markets are heading. David Gura, NPR News, New York.

(SOUNDBITE OF KENDRICK LAMAR SONG, "MONEY TREES (FEAT. JAY ROCK)") Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.