Stocks have climbed since the Federal Reserve lowered interest rates a month ago, with investors betting that it marked the beginning of a series of cuts that will offer a tailwind to the market.
And the economy continues to hum, with reports this month showing robust hiring and milder inflation, bolstering the rally.
As big companies begin to announce their latest quarterly financial results, providing key numbers that analysts use to model where the market is headed, there is a renewed sense of optimism across Wall Street. That bullishness is largely based on confidence that the Fed will tame inflation without tipping the economy into recession, a “soft landing” seldom achieved by policymakers.
“There has been a marked shift relative to 18 months ago,” said Ben Snider, an equity analyst at Goldman Sachs. “When I talk to investors there is much less concern about an economic downturn.”
Falling interest rates are generally good news for stocks because lower borrowing costs can boost corporate profits and raise market valuations. Lower rates also make the potential gains on stocks more attractive relative to the returns offered by bonds.
The S&P 500 index has risen 4 percent since the Fed cut rates last month as investors have funneled more than $20 billion into funds that buy U.S. stocks. The benchmark index has set a series of fresh record highs, including after a rise on Monday.