The S&P 500 and Nasdaq indexes hovered near record highs in Wall Street on Thursday, lifted by a jump in chip stocks after lower-than-forecast producer inflation data fanned expectations of interest rate cuts from the Federal Reserve. Hopes for coming cuts to interest rates and Wall Street’s continued frenzy around artificial-intelligence technology are keeping indexes near their records. Nasdaq component Broadcom soared 14.3% to hit a record high after the chipmaker raised its forecast for revenue from semiconductors used in artificial intelligence (AI) technology. It also announced a 10-for-1 forward stock split.
Quick Read
- The S&P 500 and Nasdaq indexes hovered near record highs on Thursday, driven by a surge in chip stocks and lower-than-expected producer inflation data, raising hopes for Federal Reserve interest rate cuts.
- Broadcom soared 14.3% to a record high after raising its revenue forecast for AI semiconductors and announcing a 10-for-1 forward stock split.
- Nvidia rose 3.3%, pushing the Philadelphia SE Semiconductor Index 1.5% higher to an all-time peak.
- The U.S. producer price index (PPI) unexpectedly fell 0.2% in May, easing Treasury yields and boosting expectations for Fed rate cuts.
- Encouraging inflation data from the consumer and wholesale levels led Fed Chair Jerome Powell to consider future interest rate reductions.
- Higher interest rates have impacted parts of the economy, particularly manufacturing, with more workers filing for unemployment last week than expected.
- Wall Street hopes for moderate job market and economic growth to ease inflation without causing a deep recession.
- Companies tied closely to the economy lagged, with Dave & Buster’s falling 12.2% due to worse-than-expected profit and revenue drops.
- The AI technology frenzy continues to propel certain companies; Broadcom and Nvidia saw significant stock increases.
- Tesla rose 2.9% as early voting results indicated shareholder approval of Elon Musk’s pay package.
- The 10-year Treasury yield fell to 4.28%, and the two-year yield dropped to 4.71%, reflecting hopes for Fed rate cuts.
- European markets fell ahead of the G7 summit in Italy, with France’s CAC 40 and Germany’s DAX losing 1.9% and 1.7%, respectively.
- In Asia, Japan’s Nikkei 225 slipped 0.4% ahead of a central bank interest rate decision, while indexes rose in Seoul and Hong Kong.
The Associated Press has the story:
Nasdaq, S&P 500 rise on soft producer inflation data and chip strength
Newslooks- NEW YORK – (AP)
The S&P 500 and Nasdaq indexes hovered near record highs in Wall Street on Thursday, lifted by a jump in chip stocks after lower-than-forecast producer inflation data fanned expectations of interest rate cuts from the Federal Reserve. Hopes for coming cuts to interest rates and Wall Street’s continued frenzy around artificial-intelligence technology are keeping indexes near their records.
Nasdaq component Broadcom soared 14.3% to hit a record high after the chipmaker raised its forecast for revenue from semiconductors used in artificial intelligence (AI) technology. It also announced a 10-for-1 forward stock split.
AI chip leader Nvidia rose 3.3%, pushing the Philadelphia SE Semiconductor Index 1.5% higher to an all-time peak.
A Labor Department report showed the U.S. producer price index (PPI) unexpectedly fell 0.2% month-on-month in May, compared with a 0.1% increase expected by economists.
Treasury yields eased again in the bond market as conviction built that inflation is slowing enough to get the Federal Reserve to cut interest rates later this year.
A report showed inflation at the wholesale level wasn’t as bad as economists expected. Prices paid by wholesalers actually dropped from April into May, when economists were forecasting a rise.
It followed a surprisingly encouraging update on inflation at the consumer level released Wednesday. Federal Reserve Chair Jerome Powell called that report encouraging and said policymakers need more such data before lowering their main interest rate from the most punishing level in two decades.
High interest rates have been dragging on some parts of the economy, particularly manufacturing. A separate report on Thursday showed more U.S. workers filed for unemployment last week than economists expected, though the number is still low relative to history.
The hope on Wall Street is that growth for the job market and economy continues to slow in order to take pressure off inflation, but not so much that it creates a deep recession.
Companies whose profits are most closely tied to the strength of the economy were lagging the market Thursday following the reports.
Dave & Buster’s Entertainment sank 12.2% after reporting worse drops in profit and revenue for the latest quarter than expected, citing a “complex macroeconomic environment” among other reasons. Other companies have recently been detailing a split among their customers, where lower-income households are struggling to keep up with still-high inflation.
Some companies have been able to skyrocket regardless of the pressures on the economy because of an ongoing frenzy around artificial-intelligence technology.
Broadcom jumped 13.3% after the semiconductor company reported stronger profit for the latest quarter than analysts expected, aided once again by AI demand. It also raised its forecast for revenue this year.
Broadcom’s stock price has jumped so high, to roughly $1,700, that it will soon give nine shares for every one that investors already hold in hopes of lowering the price and making it more affordable. It follows a similar move by Nvidia, which has become the poster child of the AI rush and seen its total market value top $3 trillion.
Tesla rose 2.9% after CEO Elon Musk said early voting results indicate shareholders are about to approve his pay package. Without it, Musk had threatened to take AI research to one of his other companies.
In the bond market, the yield on the 10-year Treasury fell to 4.28% from 4.32% late Wednesday and from 4.60% late last month. The two-year yield, which moves more on expectations for the Fed, fell to 4.71% from 4.76%.
Fed officials are mostly penciling in either one or two cuts to interest rates this year, and traders are hopeful they can begin as soon as September, according to data from CME Group. Such cuts would ease the pressure on the economy and give a boost to all kinds of investment prices.
In stock markets abroad, indexes fell across much of Europe as leaders of the Group of Seven leading industrialized nations gathered in Italy. The continent is still feeling the effects of a European Parliament election that saw a surge in support for the far right in places like France and Germany.
France’s CAC 40 fell 1.9%, and Germany’s DAX lost 1.7%.
In Asia, Japan’s Nikkei 225 slipped 0.4% ahead of a decision on interest rates by Japan’s central bank coming on Friday. Indexes rose in Seoul and Hong Kong.
