U.S. stocks ended Thursday’s trading session nearly unchanged as investors held their breath for upcoming inflation data. The Nasdaq managed a slight gain after economic reports indicated a continued slowdown, fueling hopes for potential rate cuts.
“The market is in a bit of a holding pattern here for the PCE because there hasn’t been a lot of big catalysts,” said Ross Mayfield, investment strategy analyst at Baird, referring to the anticipated release of the monthly personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, on Friday.
Economic data revealed mixed signals. New orders for key U.S.-manufactured capital goods unexpectedly fell in May, while core durable goods orders decreased by 0.1%, contrary to forecasts for a 0.2% rise. This bolstered investor beliefs that a weaker economy could prompt the Federal Reserve to cut interest rates in September.
Additionally, weekly jobless claims dropped to 233,000, missing expectations of 236,000. A final print also showed that U.S. economic growth in the first quarter was stronger than initially estimated.
Benchmark 10- and 2-year yields, which move inversely to prices, declined after the data indicated a continued but moderated slowdown in economic activity. Meanwhile, 7-year yields edged lower following a $44 billion auction.
Megacap stocks such as Alphabet and Meta Platforms saw gains of 0.83% and 1.25%, respectively, as U.S. Treasury yields slipped. Amazon rose 2.19% after hitting a $2 trillion market value for the first time on Wednesday.
The Dow Jones Industrial Average rose 36.53 points, or 0.09%, to 39,164.33. The S&P 500 gained 5.16 points, or 0.09%, to 5,483.06, and the Nasdaq Composite gained 53.53 points, or 0.30%, to 17,858.68.
Market participants have expressed concerns over the sustainability of the recent rally, emphasizing the need to diversify portfolios to hedge against potential sharp losses.
Despite these concerns, investors continue to expect around two rate cuts this year, according to LSEG’s FedWatch data, although the Federal Reserve has projected only one cut, with a 59.5% chance of a cut in September.
In a policy essay, Atlanta Fed President Raphael Bostic noted that inflation “appears to be narrowing,” which could allow for rate cuts later this year. However, Governor Michelle Bowman reiterated that she is not yet ready to support a central bank rate cut, citing still-elevated inflation pressures.
“We’ve been looking forward for most of the week to that preponderance of evidence to tip the scales on the direction for inflation,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
Among individual stocks, Micron fell 7.11% after its fourth-quarter revenue forecast, which was in line with expectations, disappointed investors hoping for more upside from the memory chipmaker amid the artificial intelligence boom. Nvidia continued its recent turbulent ride, dropping 1.90%.
Walgreens Boots Alliance slumped 22.16% after cutting its 2024 profit forecast and announcing plans to close more underperforming U.S. stores. Denim maker Levi Strauss tumbled 15.4% after falling short of expectations for second-quarter revenue.
Advancing issues outnumbered decliners by a 1.62-to-1 ratio on the NYSE. There were 168 new highs and 78 new lows on the NYSE. The S&P 500 posted 9 new 52-week highs and 2 new lows, while the Nasdaq Composite recorded 41 new highs and 118 new lows.
Volume on U.S. exchanges was 9.49 billion shares, compared with the 11.74 billion average for the full session over the last 20 trading days.
