2024.05.15 14:11
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US STOCKS-S&P, Nasdaq hit record highs as tepid inflation data fans rate cut bets

The S&P 500 and Nasdaq hit record highs as lower-than-expected inflation data increased bets of interest rate cuts by the Federal Reserve. The Dow was also set to reach a new milestone. Retail sales in April were flat and consumer spending showed signs of losing momentum. Stocks have been rallying on positive earnings and expectations of the Fed's ability to control inflation without harming growth. Real estate and technology stocks saw gains, while meme stocks like GameStop, AMC Entertainment, and Koss Corp dropped.

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Consumer prices rise less than expected in April; core CPI slows

Retail sales flat in April

Indexes up: Dow 0.53%, S&P 0.58%, Nasdaq 0.59%

(Updated at 09:42 a.m. ET/ 1342 GMT)

By Bansari Mayur Kamdar and Shristi Achar A

May 15 (Reuters) - The benchmark S&P 500 (.SPX) and Nasdaq (.IXIC) hit record highs in early trade on Wednesday after a lower-than-expected increase in a key inflation metric bolstered hopes of interest rate cuts from the Federal Reserve this year.

The blue-chip Dow (.DJI) was set to breach the 40,000-mark for the first time and the other two major indexes surpassed all-time peaks hit in March, after the lukewarm U.S. consumer prices data for April led traders to slightly raise bets that the Fed will cut its policy rate in September and again in December.

“What the data does for the Fed is it establishes the first in what they are going to need to be a series of softer CPI reports for them to be able to cut later this year,” said Jason Pride, chief of investment strategy and research at Glenmede.

“If there were concerns that they weren’t going to cut at all, this just alleviated some of those concerns.”

Separately, U.S. retail sales came in unexpectedly flat in April as higher gasoline prices pulled spending away from other goods, indicating that consumer spending was losing momentum.

At 09:42 a.m. ET, the Dow Jones Industrial Average (.DJI) rose 210.56 points, or 0.53%, to 39,768.67, the S&P 500 (.SPX) gained 30.39 points, or 0.58%, to 5,276.98 and the Nasdaq Composite (.IXIC) gained 96.94 points, or 0.59%, to 16,608.12.

Equities built on gains made on Tuesday, when Fed Chair Jerome Powell’s assessment of U.S. growth and inflation reassured investors as they digested hotter-than-expected producer prices for April.

Stocks have rallied so far this year on better-than-expected earnings for the first quarter and expectations that the Fed will be able to cool inflation without badly hurting growth and eventually transition to cutting interest rates.

Rate-sensitive real estate stocks (.SPLRCR) outpaced other sectoral indexes with a 1.7% gain.

Most megacap growth and technology stocks also rose in early trading, with Nvidia (NVDA.O) leading gains.

Retail investor darling GameStop (GME.N) fell 21%, set to snap this week’s rally that was driven by “Roaring Kitty” Keith Gill, a central figure behind the 2021 meme stock frenzy, posting on social media platform X.

Other meme stocks AMC Entertainment (AMC.N) and Koss Corp (KOSS.O) dropped 17.3% and 20.9%, respectively.

Advancing issues outnumbered decliners by a 3.96-to-1 ratio on the NYSE and by a 2.81-to-1 ratio on the Nasdaq.

The S&P 500 posted 43 new 52-week highs and no new lows while the Nasdaq recorded 153 new highs and 25 new lows.