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  • Writer's pictureThe San Juan Daily Star

S&P 500 posts record high close as Oracle jumps, traders keep rate-cut bets

U.S. stocks ended sharply higher on Tuesday, with the S&P 500 registering a record high close as Oracle shares surged and consumer price data failed to dampen investor hopes of interest rate cuts in the coming months.

Shares of Oracle reached a record high, a day after it reported upbeat quarterly results and said it is set to make a joint announcement with chip-giant Nvidia.

Nvidia shares also jumped, and an index of semiconductors snapped a two-day losing streak.

The Labor Department reported that the Consumer Price Index (CPI) rose 0.4% last month after climbing 0.3% in January. Excluding volatile food and energy components, consumer prices increased 0.4% in February after rising by the same margin in January.

“Investors have gotten comfortable with the notion that it’s not about when the Fed will lower rates but rather by how much, and a delay - whether it happens in May like many were initially hoping or in September - ultimately doesn’t matter,” said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.

“It’s that they will and that a less restrictive environment is coming.”

Traders now see a 70% chance of the first rate cut coming in June, the CME FedWatch Tool showed, versus 71% ahead of the inflation report.

According to preliminary data, the S&P 500 gained 57.12 points, or 1.12%, to end at 5,175.06 points, while the Nasdaq Composite gained 244.80 points, or 1.53%, at 16,264.08. The Dow Jones Industrial Average rose 230.43 points, or 0.59%, to 39,000.09.

“If you look at economic data, it continues to be pretty strong,” Pursche added. “And from my perspective as a consumer, employee and investor, I’d rather have a strong economy and slightly elevated interest rates than a weak economy that requires stimulus.”

Producer price data is due later this week.

On the down side, shares of Boeing fell. Boeing told employees in a memo on Tuesday that it is adding weekly compliance checks for every 737 factory work area and additional audits of equipment to reduce quality problems.

The U.S. Federal Aviation Administration has curbed Boeing production following the mid-air panel blowout on a new Alaska Airlines 737 MAX 9 jet on Jan. 5.

Also, U.S. carriers warned that their plans to increase capacity were in doubt due to jet delivery delays from Boeing.

U.S. consumer prices rose more than expected in January, amid a surge in the cost of rental housing, prompting a 1.4% drop for the benchmark stock index on Feb. 13, when the data was released.

After last month’s stronger-than-expected report, “there is certainly more trepidation regarding tomorrow’s data and this will add to the nervousness of the options market today,” said Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald.

Investors are now pricing in 94 basis points of rate cuts this year, compared to around 150 basis points they had priced in early January, according to futures tied to the fed funds. So far, however, a resilient economy, better-than-expected earnings and confidence that the Fed will nevertheless cut rates several times before the year is up have supported stocks.

According to a Reuters survey of economists, the CPI likely increased 0.4% in February, with the annual increase in prices at 3.1%. The core CPI is also forecast advancing 0.3%, with the year-on-year increase slowing to 3.7% from 3.9% in January.

The S&P 500 index was down 0.16% Monday afternoon and the Cboe Volatility Index - an options-based gauge of investors’ expectation for near-term stock market gyrations perked up 0.46 point to 15.20, a near three-week high.

Haiti is in the throes of an uprising not seen in decades. As politicians around the region scramble to hash out a diplomatic solution to a political crisis that has the prime minister, Ariel Henry, stranded in Puerto Rico and gangs attacking police stations, a humanitarian disaster is quickly escalating. The food supply is threatened, and access to water and health care has been severely curtailed.

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