The S&P 500 and Nasdaq Hit Record Highs: Will the Rally Continue?

Investors closely watch inflation as Wall Street hopes for a Fed-induced rally.

The stock market has surged in 2024, with $S&P 500 Index(.SPX.US)$ and $Nasdaq Composite Index(.IXIC.US)$ repeatedly hitting record highs. Both indices are trending at their peak levels, boosted by a promising Consumer Price Index (CPI) report.

Today, the Nasdaq jumped 1.4%, marking its seventh high in 2024, and is up over 13% year-to-date (YTD). The S&P 500 rose 1.1%, surpassing its March high and marking its longest rally since February.

Despite a slump in April, where both indices fell over 4% due to disappointing GDP and inflation data, the market rebounded strongly in May. The recent rally is driven by hopes of upcoming rate cuts, despite the Federal Reserve's cautious stance due to persistent inflation.

Today's positive CPI report has fueled optimism for rate cuts, potentially starting in September. However, some experts, like Aptus Capital Advisors' John Luke Tyner, warn that one good inflation report may not be enough for the Fed to change its course. The market's future performance hinges on continued progress in reducing inflation and potential rate cuts.