Most U.S. stocks rose on Thursday after the latest inflation update reinforced Wall Street’s belief that a September rate cut could be on the way.
About one in five stocks in the Standard & Poor’s 500 index rose, though returns from Nvidia, Microsoft and a handful of other big names masked that underlying strength. The giants were the market’s biggest winners amid a frenzy over artificial intelligence technology that critics say has become too expensive, helping the S&P 500 fall 0.9% from its peak the previous day.
Declines in Big Tech stocks also sent the Nasdaq Composite down 2% from its all-time high. The declines snapped the S&P 500 and Nasdaq’s seven-day winning streak. The Dow Jones Industrial Average, which is less tech-focused, rose 32 points, or 0.1%.
Direction was flat for most Wall Street stocks, particularly housing-related companies, real estate owners and others that benefit from lower interest rates. SBA Communications, which owns towers and other sites used for wireless communications infrastructure, was the biggest gainer in the S&P 500, up 7.5%.
Smaller companies, which have lagged the market giants for some time, also looked strong, with the Russell 2000 index of smaller stocks up 3.6% to firmly lead the market. The shift is encouraging to some market watchers, who see it as healthier for more stocks to participate in a growing market rather than for the elite 1% to overindulge.
The day’s action was even stronger in the bond market, where yields fell as traders bet the Federal Reserve would soon begin cutting its key interest rate. It has been at its highest level in more than two decades for nearly a year.
Wall Street wants lower interest rates to ease pressure on the economy because of how expensive it has become to get money to buy houses, cars or anything else with credit cards. But Federal Reserve officials have said they want to see “better data” on inflation before taking action.
Wall Street saw a report on Thursday showing that price increases for gasoline, cars and other items American consumers bought in June were up slightly from a year earlier.
“One word: critical,” said Lindsay Rosner, head of multi-sector investments at Goldman Sachs Asset Management. “With three inflation numbers between this morning and the Fed’s September meeting, today’s numbers were moving in the right direction to help the Fed gain confidence on inflation.”
Treasury yields fell immediately after the report was released. The 10-year Treasury yield fell to 4.20% from 4.28% at the close on Wednesday and from 4.70% in April. This is a big move for the bond market and a huge boost for stock prices.
Lower yields have helped real estate and utility companies lead the stock market. Lower bond yields make the relatively high dividends on these stocks more attractive to income investors.
Real estate investment trusts in the S&P 500, including SBA Communications, rose 2.7%, the biggest gain among the 11 sectors that make up the index. Utility stocks followed with a gain of 1.8%.
Builders were also hopeful that low mortgage rates would help the industry. DR Horton rose 7.3% and Lennar climbed 6.9%, making some of the biggest gains in the S&P 500. Mohawk Industries, which makes flooring, rose 7.4%.
Aside from hopes for a future interest rate cut, expectations for strong earnings growth have pushed the US stock market to record levels. According to FactSet, analysts expect S&P 500 companies to post their best growth in more than two years this reporting season, but the start has been uneven.
Delta Air Lines lost 4% after reporting spring revenue and profit that beat analysts’ expectations. The airline said summer travel demand was strong, but it also issued a profit forecast for the current quarter that missed Wall Street estimates.
Tesla fell 8.4% to give back some of the gains from an 11-day period in which the electric carmaker’s shares rose 44%. It and all other stocks in the group known as the “Magnificent Seven” fell on the same day.
Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla have lagged most of the S&P 500’s gains for more than a year as their fortunes appear independent of the strength of the economy or where interest rates are.
Overall, the S&P 500 fell 49.37 points to 5,584.54. The Dow Jones rose 32.39 to 39,753.75 and the Nasdaq rose 364.04 to 18,283.41.
In overseas stock markets, Japan’s Nikkei 225 rose 0.9%, hitting another record high. Indexes in most of the rest of Asia and Europe were also strong.
Choe writes for the Associated Press
