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Dow Jones ends above 40,000 to cap Wall Street's latest winning week

Dow Jones ends above 40,000 to cap Wall Street's latest winning week



Signage for Reddit Inc. is seen on the trading floor of the New York Stock Exchange, ahead of its March 21 IPO. Yuki Iwamura/Associated Press

NEW YORK The Dow Jones Industrial Average ended a day above the 40,000 level for the first time on Friday as U.S. stock indexes drifted around their record highs while closing out their latest winning week.

The Dow rose 134.21 points, or 0.3%, to 40,003.59, a day after briefly surpassing the 40,000 level for the first time. This and other Wall Street indexes have been rising since the fall of 2022, as the U.S. economy and corporate profits have managed to hold up despite high inflation, the punishing effects of high interest rates and concerns about a recession that seemed inevitable but did not arrive.

The S&P 500, which is the much more important index for Wall Street and most retirement savers, added 6.17 points, or 0.1%, to 5,303.27. It finished just 0.1% off its record set Wednesday and capped a fourth straight week of gains. The Nasdaq Composite Index slipped 12.35 points, or 0.1%, to 16,685.97.

Despite the placid movements of the clues, there was some feverish action going on underneath. Reddit jumped 10% after announcing a partnership in which OpenAI will bring the social media company's content to ChatGPT and become, among other things, an advertising partner. Wall Street's frenzy around artificial intelligence technology has continued to grow despite some warnings about a potential bubble.

On the losing side, GameStop and AMC Entertainment gave back more of their massive gains from earlier in the week.

GameStop fell 19.7% to cut its gain for the week to 27.2% after saying it expected to report a loss of up to $37 million for the three months through May 4. It also said it could sell up to 45 million shares in order to raise cash.

Such decisions can dilute the holdings of current shareholders, and this follows a similar decision by AMC Entertainment. After the movie theater chains' stock prices were also caught in a surge, AMC announced earlier this week that it would issue nearly 23.3 million shares to wipe out some debt.

Much of the sharp action in GameStop and GameStop's favor was due to investor enthusiasm, not fundamental changes in their earnings outlook. They weren't necessarily all investors with modest pockets buying on their phones. Renaissance Technologies, the hedge fund founded by pioneering investor Jim Simons, revealed that it purchased shares of GameStop and AMC Entertainment before the end of March, even though it may no longer own them.

Elsewhere in financial markets, Treasury yields rose and stock indexes around the world were mixed.

This week was generally good for markets after a report revived hopes that inflation is finally heading in the right direction after a discouraging start to the year. That has revived hopes that the Federal Reserve will cut its main interest rate at least once this year.

The federal funds rate is at its highest level in more than two decades, and a cut would raise investment prices and remove some of the downward pressure on the economy.

The hope is that the Fed can successfully perform the balancing act of slowing the economy enough through high interest rates to stem high inflation, but not so much that it causes a severe recession.

Of course, now that a growing percentage of traders are betting on the Fed cutting rates twice this year or more, some economists are warning that this optimism could go too far. This is something that happens a lot on Wall Street.

Although recent data reports have been better than expected, better than expected does not mean good, Bank of America economists wrote in a BofA Global Research report.

Inflation is still higher than the Fed would like, and Bank of Americas' Michael Gapen still expects the Fed to keep its main interest rate steady until it cuts it in December .

On the bond market, the yield on 10-year Treasury bills increased to 4.41% from 4.38% Thursday evening. The two-year yield, which more closely tracks Fed expectations, rose slightly to 4.82% from 4.80%.

In overseas stock markets, indexes jumped 1% in Shanghai and 0.9% in Hong Kong after China's central bank announced measures to support its ailing property market. It reduced down payments required for home loans and reduced interest rates for first and second home purchases, among other measures.

Indexes fell in Seoul, Tokyo and much of Europe.

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