The S&P 500 and Nasdaq indexes hovered near record highs 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.
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 polled by Reuters.
Separately, the number of Americans filing new claims for unemployment benefits increased to a 10-month high last week.
Markets lifted bets on a September start to rate cuts to nearly 68% from 60% before the data, according to the CME’s FedWatch tool. That was despite policymakers projecting only one rate cut this year.
Wall St slips ahead of inflation report
Investor sentiment was also supported by softer-than-expected U.S. consumer inflation data on Wednesday and Fed Chairman Jerome Powell’s acknowledgement that progress had been made in tackling price pressures.
“PPI was a good number … it speaks to the Fed’s comments that inflation has shown signs of moderating, but they still need to see more signs of moderation in inflation,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
“But we’re moving in the right direction and it speaks to the potential for a rate cut of most likely in September.”
UBS Global Research said it now expects the Fed to cut interest rates in December instead of September, while Goldman Sachs and Morgan Stanley continue to expect the first cut in September.
Also on tap, New York Fed President John Williams will moderate a panel later in the day.
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