David French
(Reuters) – Both indexes held on to gains and finished slightly higher on Tuesday, continuing a recent winning streak driven by renewed expectations that the Federal Reserve will cut interest rates this year.
The gains lifted the S&P 500 to its fourth straight rise, its best performance since March. The Dow Jones Industrial Average is now on track for its longest positive advance since December 2023, gaining for the fifth straight session.
Benchmark performance was achieved despite Walt Disney (NYSE:) fell 9.5%, its biggest percentage drop since November 2022, as a surprise profit from its streaming entertainment division was overshadowed by a decline in its traditional TV business and weaker box office revenue.
Despite Disney’s resistance, markets were broadly buoyed by weaker-than-expected labor market reports last week, heightening bets that the U.S. central bank will cut rates.
Quotes also went into positive territory, but in afternoon trading on Tuesday they fell and closed slightly lower, breaking their winning streak at around three.
“I think the market is in this little bit of a holding pattern until the big data comes out next week,” said Garrett Melson, portfolio strategist at Natixis Investment Manager Solutions, referring to the producer price index (PPI) coming out May 14, and the consumer price index. The index (CPI) is scheduled for May 15.
Overall, the Fed and policymakers have been consistent in recent weeks in their statements that rate cuts will happen, but the central bank will be cautious in implementing them.
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That meant that on a day without important data, markets shrugged off comments from Minneapolis Federal Reserve President Neel Kashkari that the Fed may have to hold rates steady through the end of the year due to stalled inflation and the strength of the housing market.
Overall, Friday’s better-than-expected payrolls and earnings data helped calm investor concerns about persistent inflation and a resilient economy that are keeping rates high.
Traders expect the Fed to cut rates by 46 basis points (bps) by the end of 2024, according to LSEG’s interest rate probabilities app, with the first turn to rate cuts coming in September and another in December. Before last week’s labor report, they expected only one layoff.
“The market is much more sensitive to data than the Fed,” Natixis’ Melson said, adding that “the bar for the Fed to abandon easing is extremely high.”
The S&P 500 added 6.96 points, or 0.13%, to 5,187.70 and 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.
Megacap Alphabet (NASDAQ:) and Meta Platforms (NASDAQ:) shares rose 1.9% and 0.6%, respectively, lifting major indexes.
Nvidia (NASDAQ:) shares fell 1.7% after the Wall Street Journal reported that Apple (NASDAQ:) is developing its own chip to run artificial intelligence (AI) software in data centers.
Apple shares rose 0.4% as it unveiled a new chip called the M4, but put the new chip in the iPad Pro model rather than the laptop.
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Tesla (NASDAQ:) shares fell 3.8% after data showed the US automaker sold 62,167 Chinese-made electric vehicles in April, down 18% from a year earlier.
Palantir Technologies (NYSE:) shares fell 15.1%, their sharpest one-day decline since May 2022, after the research firm’s full-year revenue forecast missed analysts’ estimates.
The S&P 500 posted 49 new 52-week highs and 2 new lows, while the Nasdaq recorded 155 new highs and 69 new lows.