Investors aren’t letting a little bad news bother them. Despite some unsettling developments, Wall Street roared to new records this week. Even with tariff-inducted inflation rising and growing signs of stress in the labor market, the focus now is on healthy corporate profits and aid on the way from Washington. Among the worst of it: The Bureau of Labor Statistics issued revisions to prior payroll counts that showed the economy created nearly a million fewer jobs than previously thought. On top of that, layoffs spiked last week, inflation edged higher and worker confidence by one measure hit record lows. There’s also geopolitical turmoil: Wars continue in Ukraine and Gaza, President Donald Trump’s economic policies are ever-changing while he also seeks to remake the Federal Reserve, and the murder of conservative activist Charlie Kirk underscored the nation’s volatile and violent political climate. Still, the prospect of multiple Fed interest rate reductions on the way, buttressed by corporate profits showing little signs of tariff stress and renewed enthusiasm over the future of cloud computing and Big Tech in general leaves the market in a relatively positive mood. “The market lives in the future,” said Mark Luschini, chief investment officer at Janney Capital Management. “That collage is helping to paint a more optimistic picture of what the next six to nine months look like for stock prices.” While the temptation is to focus squarely on hopes for a series of Fed rate cuts currently being priced in, market experts see the latest leg of the rally about more than easier monetary policy. Stimulus is back Some of those factors Luschini cites are coming deregulation, retroactive depreciation writeoffs and tax cuts from the One Big Beautiful Bill. There’s also the relatively low unemployment rate even with stalled job creation, and, yes, market expectations that the Fed is about to resume a rate-cutting cycle that had been on hold throughout 2025. “Collectively, a variety of factors leaves market participants to believe the labor market will remain stitched well enough together in order to get the boost that is going to be forthcoming on a couple of different fronts,” he said. “Last but not least, some loosening on monetary policy … is at least signaling that some of the noose around the economy is going to be loosened.” Specifically on rates, the market strongly indicates that the Federal Open Market Committee, the central bank’s rate-setting body, will lower the benchmark fed funds rate from its current 4.25% to 4.5% by a quarter percentage point when it wraps up its two-day meeting Wednesday, according to the CME Group’s FedWatch . From there, traders see additional reductions coming in October and December, followed by three more in 2026 — a considerably more aggressive path than what FOMC members laid out in their last update in June. That’s given some relief that whatever weakness does show up in the economy could be offset by another round of policy help. “This steady market rally shows that investors are increasingly forward-looking, pricing in a blend of policy accommodation, improving productivity dynamics and the potential for fiscal support,” said Mark Hackett, chief market strategist at Nationwide Financial. “In many ways, investors are leaning into the idea that slower labor momentum doesn’t necessarily derail corporate earnings or broader growth potential, but rather that supportive tailwinds will offset the recent wave of slowing economic data, as evidenced by easier financial conditions,” he added. Fighting inflation, valuing tech To be sure, plenty of obstacles remain for the market. Inflation data this week showed that while producer prices fell , costs for consumers continued to climb, particularly in tariff-sensitive areas like groceries, clothing and furniture. The consumer price index in August rose 2.9% from a year ago, hitting its highest level since January and serving as a reminder that while the Fed’s focus may shift to supporting the labor market, inflation remains a concern. But investors are staying positive, and this week brought news that the tech story is far from over. Oracle issued a stunning earnings beat , projecting eye-watering demand for its cloud services and generating the biggest single-day rally for the stock in 33 years — a move cooled off after the initial hype. Widely-followed market bull Tom Lee at Fundstrat Global Advisors upped the ante for the sector, pointing out that companies such as Nvidia are still valued at lower multiples than comparatively old-economy staples like Costco and Walmart . “This is why we think NVDA is vastly undervalued,” Lee said in a note. “But if NVDA is vastly under-valued, this argues that AI valuations overall are too low. Plus, the … surge in [Oracle] also suggests that these stocks are undervalued.” Market veteran Ed Yardeni also weighed in, noting that forward earnings estimates just posted a record high for 16 straight weeks. And Wells Fargo asserted that the one-two punch of AI investment and easier Fed policy should continue to feed gains. The firm has a 6,650 target on the S & P 500 by the end of this year, implying only a modest gain from current levels, but sees the large-cap index surging to 7,200 in 2026, indicating a 9% rise ahead. “We are bullish on equities,” Ohsung Kwon, the bank’s chief equity analyst, said in a note. “Yes, there is froth, but as long as AI capex remains intact, the bull market should continue. The Fed put is also well alive.” ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
