Dow Headed to Historic 14-Day Winning Streak as Strong U.S GDP Report Sends Stocks Higher

On Thursday, U.S. stocks displayed a positive trend, with the S&P 500 index on track for its highest close in 16 months, while the Dow Jones Industrial Average could potentially extend its historic winning streak.

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The Dow Jones Industrial Average rose by 76 points, or 0.2%, reaching 35,596. Similarly, the S&P 500 gained 26 points, or 0.6%, climbing to 4,592. The Nasdaq Composite advanced by 135 points, or 1%, reaching 14,263.

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The previous day, the Dow Jones Industrial Average achieved a 13th consecutive session of gains, making it the longest winning streak since 1987.

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This positive momentum in U.S. stocks can be attributed to strong earnings reports and encouraging economic data. The Dow is on track for a potential 14th session of gains, which would match a 14-day winning streak dating back to 1897. Additionally, the S&P 500 is expected to close at its highest level since March 29, 2022, based on FactSet data.

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Meta, the company behind Facebook and Instagram, reported better-than-expected earnings, leading to an 8% surge in its shares after markets opened. This boost helped the Nasdaq Composite lead among the major U.S. equity indexes. Furthermore, robust second-quarter GDP growth and lower weekly jobless benefit claims provided additional support to both the Dow and the S&P 500.

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Earnings reports from Comcast Corp. and McDonald’s Corp. also exceeded Wall Street's sales expectations, contributing to the positive market sentiment. Chipmaking giant Intel's results were due out after the market's close.

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Notably, stronger-than-anticipated performance by the largest U.S. companies during the second quarter has been a key driver of the stock market's upward trajectory in July, contributing to the historic winning streak for the Dow.

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However, it's worth noting that market expectations were relatively low heading into the quarter, as it was anticipated to be the third consecutive quarter of negative earnings growth for S&P 500 companies. Consequently, companies that exceeded earnings expectations can be likened to "dunking on an eight-foot hoop," as described by Jason Krupa, Vice President of Asset Management at Lenox Advisors.

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So far, S&P 500 companies have surpassed Wall Street's earnings expectations by an impressive 7.1%, compared to the long-term average of 4.1%, according to Refinitiv's latest data.

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The highlight of this week's market events was the Federal Reserve's decision to increase interest rates by a quarter percentage point, establishing a range between 5.25% and 5.5%. Traders are speculating that this rate hike could mark the end of a cycle that began in March 2022 when the Fed began raising interest rates from the zero-bound levels they held during the COVID-19 pandemic.

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Analysts at HSBC predict that the Fed will maintain its policy rate within the current range until the second quarter of 2024, followed by a reduction of 75 basis points next year.

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Additionally, the European Central Bank also implemented its own interest-rate hike, raising its deposit rate by 25 basis points to 3.75%.

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