Dow, S&P 500 And Nasdaq Hit Record Highs On Rate Cut Hopes

High expectations among ebullient investors about an all but certain interest rate cut this month drove all three major Wall Street indices to record highs Wednesday. The trading day, however, ended much earlier at 1:00 p.m. ET due to the Fourth of July holiday.

The Dow Jones Industrial Average ended the day at 26,966, up 179.32 points, while posting intraday and closing all-time highs along the way.

The benchmark S&P 500 improved 0.7% to 2,995.82 on strong results by the real estate and consumer sectors that took the index to record levels. It closed a scant 0.1% below 3,000. The S&P 500 is up more than 1% week-to-date and posted back-to-back record closes on Tuesday and Wednesday.

The NASDAQ Composite advanced 0.8% to 8,170.23, reaching a record high on the strength of tech stocks. Shares of Facebook, Amazon, Netflix and Google-parent Alphabet all rose Wednesday.

A notable gainer was Tesla, which continued to benefit from delivery numbers released Tuesday that went beyond expectations. The stock closed Wednesday at $234.90, up 4.6%.

“It’s early stock fireworks,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Wednesday's impressive results now see investors bracing for a correction and some profit-taking.

"The first time we get there you’ll probably see some profit-taking," said Scott Redler, chief strategic officer at online financial media network T3live. "If technology continues to be strong and the semiconductors get some kind of bounce, that could probably push the S&P 500 through it 3,000."

Analysts said Wall Street's strong start this week was the immediate aftermath of a ceasefire on the trade war front between the U.S. and China. The record highs of the past two days, however, were triggered by signs pointing to an inevitable Fed rate cut this month.

Disappointment over a much lower than expected rise in private payrolls seems to strengthen the Fed's case for a rate cut, according to some analysts. Private payrolls rose by just 102,000 in June compared to an expected growth of 135,000 as estimated by economists polled by Dow Jones.

“As you look around the globe, general business indicators are showing some slowing and it seems like now we’re starting to see a bit of slowing in the United States,” noted Scott Colyer, chief investment officer at Advisors Asset Management.

“There’s virtually 100% chance that the Fed will lower rates at the July meeting. I think the Fed will see the economic indicators in the United States are beginning to slow.”

Wall Street has been agitating for lower benchmark interest rates after the Fed did four increases in 2018.