US STOCKS-S&P 500, Nasdaq at record highs as inflation data fuels rate-cut bets

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The benchmark S&P 500 and the Nasdaq traded at record highs on Wednesday after a lower-than-expected increase in a key inflation metric bolstered hopes that the Federal Reserve will cut interest rates this year. The blue-chip Dow edged closer toward hitting the 40,000 milestone for the first time, while the two other major indexes surpassed record highs hit in March. Tepid U.S. consumer prices data for April led traders to raise bets that the Fed will cut its policy rate in September and December.

“It’s not just today’s inflation print but a collective sigh of relief that potentially the last four readings were just an early year inflation scare rather than something persistent,” said Tony Welch, chief investment officer of SignatureFD. He also cited the latest retail sales data and recent signs of slack building in the U.S. labor market. “The backdrop is rates don’t go up further and at best come down,” Welch said, adding that he thinks year-over year inflation will not slow down enough to prompt the Fed to cut rates. “You’d get a rate drop if there’s notable weakening in the economic backdrop.”

Also on Wednesday, U.S. retail sales were unexpectedly flat in April as higher gasoline prices pulled expenditure away from other goods, indicating that consumer spending was losing momentum. At 02:24 p.m. ET, the Dow Jones Industrial Average rose 269.69 points, or 0.68%, to 39,827.80. The S&P 500 gained 54.22 points, or 1.03%, at 5,300.90 and the Nasdaq Composite advanced 216.68 points, or 1.31%, to 16,727.86.

Equities built on Tuesday’s gains, when Fed Chair Jerome Powell’s assessment of U.S. growth, inflation and the interest rate outlook reassured investors after hotter-than-expected producer prices for April. Stocks have rallied so far this year on better-than-expected earnings for the first quarter and expectations that the Fed will be able to cool inflation without damaging growth and eventually transition to cutting interest rates.

Among the S&P 500’s 11 major sector indexes, rate-sensitive technology stocks and real estate outpaced the rest with respective gains of 2.3% and 1.8%. Consumer discretionary was the sole loser, down 0.31%. Nvidia, up 3.7%, was the biggest index point contributor to the tech sector, followed by Microsoft, up 1.8%, and Apple, rising 1.5%.

In earnings, Walmart was expected to provide more color on consumer spending when it reports results on Thursday. The retail giant’s shares fell 0.3% on Wednesday, on track for their third straight session of declines. Retail investor darling GameStop fell 24%, snapping this week’s sharp rally driven by “Roaring Kitty” Keith Gill, a central figure behind the 2021 meme stock frenzy – posting on social media platform X.

Other meme stocks such as AMC Entertainment and Koss Corp each fell more than 20%. Advancing issues outnumbered decliners by a 2.83-to-1 ratio on the NYSE where there were 588 new highs and 33 new lows.

On the Nasdaq, advancing issues outnumbered decliners by a 1.62-to-1 ratio. The S&P 500 posted 68 new 52-week highs and no new lows while Nasdaq recorded 244 new highs and 67 new lows.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)