The S&P 500 was 0.3% higher in early trading, a day after jumping to an all-time high with the Nasdaq also building on its own record and up 0.7%
US stocks are hovering around their record highs on Thursday, following a mix of economic data, including the latest encouraging update on inflation.
The S&P 500 was up by 0.3% in early trading, building on its all-time high from the previous day. The Nasdaq composite was also adding to its own record, up by 0.7%, at the beginning of trading. However, the Dow Jones Industrial Average was down by 154 points, or 0.4%.
In the bond market, Treasury yields eased once again as confidence grows that inflation is slowing enough for the Federal Reserve to consider cutting interest rates later this year. A report showed that inflation at the wholesale level wasn’t as severe as economists had predicted.
Prices paid by wholesalers actually fell from April to May, contrary to economists’ forecasts of a rise. This follows a surprisingly positive update on consumer-level inflation released on Wednesday. Federal Reserve Chair Jerome Powell described the report as encouraging and stated that policymakers need more such data before they can lower their main interest rate from the highest level in two decades.
High interest rates have been a drag on certain sectors of the economy, particularly manufacturing. A separate report released on Thursday revealed that more US workers filed for unemployment last week than economists had anticipated, although the number remains low in historical terms.
Wall Street is clinging to the hope that the job market and economy will continue to cool down, easing inflation without triggering a severe recession. On Thursday, shares in sectors closely tied to economic health underperformed following these reports.
Dave & Buster’s Entertainment’s shares plummeted by 10.2% after it reported steeper than anticipated falls in profit and revenue for the latest quarter, blaming a “complex macroeconomic environment” among other factors. Other firms have also noted a divide in consumer behaviour, with lower-income shoppers feeling the pinch of persistent inflation.
Yet, some businesses are soaring despite economic headwinds, riding the wave of excitement over artificial intelligence technology. Broadcom’s shares leapt by 14.6% as the semiconductor giant posted profits surpassing analyst expectations for the recent quarter, buoyed by robust AI demand. The company has also upped its revenue forecast for the year.
With Broadcom’s share price soaring past $1,700, the company plans to issue nine new shares for every existing one to bring down the price and enhance accessibility. This echoes Nvidia’s strategy, which has become synonymous with the AI boom and boasts a market valuation exceeding $3trillion.
Tesla’s shares surged by 6.9% after chief executive Elon Musk revealed that early voting results suggest shareholders are set to approve his pay package. Without this approval, Musk had threatened to shift AI research to one of his other companies. In the bond market, the yield on the 10-year Treasury dipped to 4.26% from 4.32% late Wednesday and from 4.60% late last month. The two-year yield, which is more influenced by expectations for the Fed, dropped to 4.70% from 4.76%.
Fed officials are largely expecting one or two cuts to interest rates this year, and traders are optimistic that these could start as early as September, according to data from CME Group. Such cuts would alleviate pressure on the economy and boost all kinds of investment prices.
Overseas stock markets saw indexes fall across much of Europe as leaders of the Group of Seven leading industrialised nations convened in Italy. The continent continues to grapple with the aftermath of a European Parliament election that witnessed a surge in support for the far right in countries like France and Germany.
France’s CAC 40 dropped 1.3%, and Germany’s DAX fell 1.1%. In Asia, Japan’s Nikkei 225 slipped 0.4% ahead of a decision on interest rates by Japan’s central bank scheduled for Friday. However, indexes rose in Seoul and Hong Kong.
