Dow finishes above 40,000 to cap Wall Street’s latest winning week

The Dow Jones industrial average finished above the 40,000 level for the first time Friday as U.S. stock indexes drifted around their records while closing out the latest winning week.

The Dow rose 134.21 points, or 0.3%, to 40,003.59, a day after briefly topping the 40,000 level for the first time. The Dow and other Wall Street indexes have been climbing since the autumn 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 worries about a recession that seemed inevitable but hasn’t arrived.

The Standard & Poor’s 500, 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% shy of its record set Wednesday and closed out a fourth straight week of gains. The Nasdaq composite slipped 12.35 points, or 0.1%, to 16,685.97.

Despite the placid movements for indexes, feverish action was roiling underneath. Reddit jumped 9.1% after announcing a partnership in which OpenAI will bring the social media company’s content to ChatGPT and become an advertising partner. Wall Street’s frenzy around artificial intelligence technology has continued to build despite warnings of a potential bubble.

On the losing end was GameStop, which gave back more of its massive gains won at the start of the week. GameStop dropped 23.4% after saying it expects to report a loss of $27 million to $37 million for the three months through May 4. It also said it could sell up to 45 million shares of stock to raise cash. Such moves can dilute the holdings of current shareholders.

AMC Entertainment has made a similar move. After its stock price also got caught up in a rocket ride, the movie-theater chain said this week it would issue nearly 23.3 million shares of stock to wipe out some debt. Much of the whipsaw action for AMC and GameStop was more the result of enthusiasm among investors than any announcement that would change the companies’ profit prospects.

Not all were small-pocketed investors. Renaissance Technologies, the hedge fund founded by pioneering investor Jim Simons, bought shares of both GameStop and AMC Entertainment before the end of the first quarter.

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

This week has been a good one for markets broadly after a report rekindled hopes that inflation is heading back in the right direction after its discouraging start to the year. That in turn has revived hopes for the Federal Reserve to cut its main interest rate at least once this year.

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

The hope is that the Fed can pull off the balancing act of slowing the economy enough through high interest rates to stamp out high inflation but not so much that it causes a bad recession.

Of course, now that many traders are betting on the Fed cutting rates at least two times this year, some economists are cautioning that optimism may be going too far. It’s something that happens often on Wall Street.

While data reports recently have been better than forecast, “better than expected doesn’t mean good,” economists at Bank of America wrote.

Inflation is still higher than the Fed would like, and Bank of America’s Michael Gapen expects the Fed to hold its main interest rate steady until cutting it in December.

In the bond market, the yield on the 10-year Treasury rose to 4.42% from 4.38% late Thursday. The two-year yield, which more closely tracks expectations for the Fed, edged up to 4.82% from 4.80%.

In stock markets abroad, indexes jumped 1% in Shanghai and 0.9% in Hong Kong after China’s central bank announced moves to bolster its struggling property market. It reduced required down payments for housing loans and cut interest rates for first and second home purchases, among other moves.

Indexes fell in Seoul, Tokyo and across much of Europe.

Choe writes for the Associated Press.