Dow rallies over 40,000 on CPI. Is the Fed ready for rate cuts?

The Dow Jones Industrial Average (^DJI) crossed above 40,000, a record-high for the market index, on Thursday morning. Markets (^IXIC, ^GSPC) may be encouraged by Wednesday's cooler-than-expected Consumer Price Index (CPI) inflation print for April, but is the Federal Reserve fully on board with the idea of interest rate cuts?

New York Fed President John Williams believes inflation could fall below 3% by the end of the year, amidst comments from other Fed officials that say April's CPI is not enough to green light rate cuts

Catalysts Hosts Seana Smith and Madison Mills sparse through this week's Fed commentary as markets rally to new highs.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Luke Carberry Mogan.

Video transcript

Stock still climbing.

I today the dow passing 40,000 for the first time ever.

The rally sparked by Wednesday softer inflation print, spurring optimism around a possible rate cut this year.

Investors are watching the slew of Fed speak that we are expecting to get today for any sign that cuts are coming.

We already heard from Richmond Fed President Tom Bark and saying that CP I is still not where the FED is trying to get it down to.

But on the flip side, we have the most commentary and from New York fed President John Williams, he said he does see inflation in the low twos and possibly as low as 2.5% at the end of this year.

That is a lot lower than what the market has been pricing in.

So that could be an indication that cuts could be coming this year if that's what he's thinking.

But he also runs this model that shows that the FED has been more restrictive than a lot of people think they are.

So he could have potentially bi Yeah, exactly.

And, and also he co it a little bit saying that the f still needs a little bit more evidence before.

Do have the confidence to c but you're exactly right when you talk about his expectations to where inflation is going to be between now and the end of the year, he does see significantly more improvement than what is being priced in right now to the market.

So that could suggest maybe some further upside that we could see here.

But again, the dow pushing above 40,000 the first time ever.

And I think that just really highlights some of the commentary that we're getting, not only from fed officials here this morning, but also this optimism that has remained on the street that we are going to get cuts before the end of the year that corporate earnings have been holding.

That has really been the driver here for the market.

So many strategists that we have talked to over the last several weeks have actually been brushing aside some of that rate cut talk, the timing of the rate cut talk and really focused on that stronger than expected earnings and the prints that we have gotten out so far this earnings season.

And what exactly that could signal here for future growth at least in the intermediate term here.

So again, that being inflation, the resilience economy that coupled with very, very strong earnings results enough to push the dow here above 40,000, we'll see that where we close the day