The stock market hit fresh records on Thursday, with the Dow Jones Industrial Average notching a historic first close above 27,000 amid reinforced expectations of a rate cut and strong performance by health insurance stocks.
The Dow breached the 27,000 mark in early morning trading, maintaining a strong performance throughout the day to close at 27,088, up by 227 points. The S&P 500, which hit a record intraday high of 3,000 on Wednesday, closed at a fresh high of 2999.89 on Thursday, up 0.23 percent.
Shares in Cigna, United Health, and CVS all soared Thursday after President Donald Trump decided not to move forward with a plan to ban “backdoor rebates” for pharmacy benefit managers, which could have impacted the way insurers negotiate discounts on pharmaceuticals from manufacturers.
Investors also cheered the increasing certainty of the first rate cut in a decade, after Federal Reserve Chairman Jerome Powell spoke for a second day on Capitol Hill as part of his twice-yearly testimony on monetary policy.
“We’re learning that interest rates — that the neutral interest rate — is lower than we had thought,” said Powell. “I think we’re learning that the natural rate of unemployment is lower than we thought. So monetary policy hasn’t been as accommodative as we had thought.”
His comments further cemented expectations for a cut in the central bank’s benchmark interest rate, for which markets — and Trump — have been clamoring in recent weeks, noting economic headwinds and ongoing trade tensions.
Despite a robust jobs report last month that dialed back the notion that U.S. economic growth was sputtering, investors have priced in a rate cut of between 0.25 percent and 0.5 percent, ahead of the Fed’s July 30-31 monetary policy meeting.
President Donald Trump praised the employment report, saying the economy “would be like a rocket ship,” if the Federal Reserve were to cut rates. “But we don’t have a Fed that knows what it’s doing,” he said last week.
The Dow crossed 26,000 on Jan. 16, 2018, just 12 days after hitting a previous record high of 25,000, bolstered by Trump’s fiscal stimulus plan and tax reform measures.
The blue-chip index has chalked up gains of close to 16 percent this year.