By David French
(Reuters) – Both held on to gains and finished slightly higher on Tuesday, extending recent winning streaks fueled by renewed expectations that the Federal Reserve will cut interest rates this year.
The advances led the S&P 500 to a fourth consecutive close higher, and its best winning streak since March. For the Dow, it is now on its longest positive streak since December 2023, winning for the fifth consecutive session.
The benchmark results occurred even though Walt disney (NYSE fell 9.5%, its biggest percentage drop since November 2022, as a surprise gain in its streaming entertainment division was overshadowed by a decline in its traditional television business and weaker box office.
Despite the Disney drag, broader markets have been buoyed by a weaker-than-expected labor market report last week, which fueled bets that the U.S. central bank will cut rates.
It has also benefited, but fell in afternoon trading on Tuesday and closed slightly lower, snapping its own three-year winning streak.
“I think the market is in this little holding pattern until the big data comes in next week,” said Garrett Melson, portfolio strategist at Natixis Investment Manager Solutions, referring to the Producer Price Index (PPI) due out on May 14, and to the Consumer Price Index. Index (CPI) scheduled for May 15.
Overall, the Federal Reserve and policymakers have been consistent in their messaging in recent weeks that rate cuts are coming, but the central bank will be cautious in implementing them.
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This meant that, on a day with no major data announcements, markets ignored comments from Minneapolis Federal Reserve President Neel Kashkari that the Fed might need to keep rates steady for the rest of the year due to the stagnant inflation and the strength of the real estate market.
Overall, Friday's payrolls data and better-than-expected earnings reports have helped calm investor jitters about sticky inflation and a robust economy that have kept rates elevated.
Traders anticipate 46 basis point (bp) rate cuts from the Federal Reserve by the end of 2024, according to the LSEG Interest Rate Probabilities App, with the first turn toward rate cuts to be seen in September and another in December. They only expected a cut before last week's jobs report.
“The market is much more hypersensitive to data than the Fed,” Natixis' Melson said, adding that “the bar for the Fed to abandon the easing bias is extremely high.”
The S&P 500 gained 6.96 points, or 0.13%, to 5,187.70 points, while the Nasdaq Composite lost 16.69 points, or 0.10%, to 16,332.56. The Dow Jones Industrial Average rose 31.99 points, or 0.08%, to 38,884.26.
Mega-cap stocks Alphabet (NASDAQ and Meta Platforms (NASDAQ ) rose 1.9% and 0.6%, respectively, boosting major indices.
Nvidia (NASDAQ fell 1.7% after the Wall Street Journal reported that Apple (NASDAQ was developing its own chip to run artificial intelligence (ai) software in data centers.
Apple gained 0.4% by introducing a new chip called M4, but installed the new chip in an iPad Pro model instead of a laptop.
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Tesla (NASDAQ fell 3.8% after data showed the American automaker sold 62,167 electric vehicles made in China in April, down 18% from a year earlier.
Palantir Technologies (NYSE fell 15.1%, its biggest one-day decline since May 2022, after the data analytics company's annual revenue forecast missed analyst estimates.
The S&P 500 recorded 49 new 52-week highs and 2 new lows, while the Nasdaq recorded 155 new highs and 69 new lows.
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