In a continuation of its upward trajectory, U.S. stocks are inching closer to record highs on Monday, fueled by the ongoing momentum on Wall Street. The S&P 500 surged 0.5% in afternoon trading, poised to surpass its all-time high achieved last Wednesday. This positive trend comes after the index completed its 10th winning week out of the last 12, primarily driven by speculation that inflation is slowing down enough to prompt the Federal Reserve to implement interest rate cuts.

The Dow Jones Industrial Average also experienced gains, climbing 261 points or 0.7%, positioning itself for a potential record-breaking performance. Similarly, the Nasdaq composite saw a 0.5% increase. Notably, sectors that tend to flourish when former President Donald Trump's chances for re-election appear stronger saw significant growth. Trump Media & Technology Group, the company behind Trump's Truth Social platform, soared by 36.5%. Additionally, Bitcoin rebounded above $63,000 following an assassination attempt on Trump, who has positioned himself as a crypto-friendly candidate, over the weekend. Analysts, like Isaac Boltanksy, Director of Policy Research at BTIG, suggest that Trump's response after the attack may give him a boost in the polls, much like President Ronald Reagan experienced in 1981. Boltansky highlights that "Trump's defiance following the attack could be the defining image of this election cycle."

The yields for longer-term Treasurys also surpassed those of shorter-term ones, with the 10-year Treasury yield increasing from 4.19% to 4.22% at the close of trading on Friday. A similar situation unfolded after last month's debate between Trump and President Joe Biden, when traders anticipated a potential Republican sweep in the November election, leading to speculation about policies that might raise the U.S. government's debt. Financial companies, expected to benefit from a less stringent regulatory landscape under a Republican administration, also played a significant role in driving market performance. JPMorgan Chase, one of the sector leaders, rose by 2.7%, bolstering the S&P 500. Likewise, investment bank Goldman Sachs reported stronger-than-expected profits and revenue for the latest quarter, driving a 2% increase in their stock price. BlackRock, the asset manager behind the iShares exchange-traded funds, exceeded profit forecasts but fell slightly short of revenue expectations, resulting in a 0.5% increase in their stock.

Broadly speaking, this earnings reporting season is anticipated to be strong, with analysts predicting a growth rate of 9.3% for S&P 500 companies compared to the previous year. Such optimistic forecasts, coupled with encouraging reports on inflation, have propelled U.S. stocks towards record-breaking levels. The prospect of the Federal Reserve initiating interest rate cuts in September to alleviate the burden of steep borrowing costs on the economy has instilled further optimism.

Federal Reserve Chair Jerome Powell, speaking before the Economic Club of Washington, emphasized that the Fed would not provide any signals regarding the timing of interest rate cuts. However, Powell acknowledged that the central bank understands the risks of waiting too long or not long enough. Delayed rate cuts could push the already slowdown-stricken U.S. economy into a recession, while overly aggressive cuts may reignite inflation.

Despite the seemingly unstoppable ascent of the U.S. stock market, some skeptics remain cautious due to what they perceive as inflated prices. The S&P 500 has already surged by over 18% this year and reached an all-time high on 37 occasions. Barry Bannister, Chief Equity Strategist at Stifel, who previously forecasted an imminent stock price correction, continues to warn of a potential 10% drop. Bannister cites concerns of persistently high inflation and slower-than-expected economic growth in the second half of the year, which he believes could result in "moderate stagflation" and adversely impact high-growth stocks, which have been the darlings of Wall Street.