U.S. stocks closed up on Tuesday, helped by some advances in economically sensitive sectors, as investors awaited inflation data and the Federal Reserve’s policy meet next week.
Inflation data is expected to show consumer prices cooled slightly on a month-over-month basis in May but core prices are likely to have remained elevated, and the Fed is widely expected to hold interest rates.
Major indexes wavered as investors took a breather after pushing the S&P 500 up almost 20% from its October 2022 lows, boosted by gains in megacap stocks, a stronger-than-expected earnings season and hopes that the U.S. central bank is nearing the end of its interest rate-hike cycle.
The Dow Jones Industrial Average rose 10.42 points, or 0.03%, to 33,573.28, the S&P 500 gained 10.06 points, or 0.24%, to 4,283.85 and the Nasdaq Composite added 46.99 points, or 0.36%, to 13,276.42.
“It looks like investors are gaining a little optimism,” said Cresset Capital CIO Jack Ablin.
“The narrowness in the market where everyone was focused on the top seven names or so is starting to dissipate a little bit and that’s good news.”
Financials rose 1.33% to lead gains among the 11 major S&P 500 sectors, while the KBW regional banking index jumped 5.41%. The Russell 2000 index of small-cap companies added 2.69%.
Recent economic data and dovish remarks from Fed officials have raised the odds of the Fed holding interest rates at its June 13-14 meeting.
Fed fund futures indicate traders have priced in a near 80% chance that the central bank will hold interest rates in the 5%-5.25% range, according to CMEGroup’s Fedwatch tool. However, they see 50% odds of another 25-basis-point rate hike in July.
Coinbase Global plunged 12.09% after the U.S. Securities and Exchange Commission sued the crypto exchange, accusing it of illegally operating without having first registered with the regulator.
Apple Inc extended losses to slip 0.21%, a day after the iPhone maker unveiled a costly augmented-reality headset called the Vision Pro, barging into a market dominated by Meta.
Advanced Micro Devices rose 5.34% after Piper Sandler raised the price target on the stock to $150, the second highest on Wall Street, as per Refinitiv data.
Advancing issues outnumbered declining ones on the NYSE by a 3.47-to-1 ratio; on Nasdaq, a 2.59-to-1 ratio favored advancers.
The S&P 500 posted 17 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 98 new highs and 69 new lows.
Harker echoed the same sentiment. “I am in the camp increasingly coming into this meeting thinking that we really should skip,” Harker said at an event on financial stability. That said, data due on Friday about the U.S. job market “may change my mind.”
Following their comment, fed funds futures have factored in a 70% chance the Fed will keep rates unchanged next month, up sharply from a 30% probability earlier in the wake of data showing an increase in U.S. job openings.
The Labor Department reported on Wednesday that U.S. job openings unexpectedly rose in April and data for the prior month was revised higher, pointing to persistent strength in the labor market.
The Job Openings and Labor Turnover Survey, or JOLTS report, also showed layoffs declined significantly last month. There were 1.8 job openings for every unemployed person in April, up from 1.7 in March, and well above the 1.0-1.2 range viewed as consistent with a jobs market that is not generating too much inflation.
After the JOLTS report, rate futures had priced in a nearly 70% chance of a rate increase next month.
“We have been suggesting that they (the Fed) stop,” said Ellis Phifer, managing director, fixed income capital markets at Raymond James in Memphis, Tennessee.
“But they are still so nervous of not signaling that they are done. Even though inflation is still high, it seems to be easing. Some things seem like a little bit loose and so if the Fed is going to be on pause, it’s time. They need to let some of this data work through.”
Leaning toward what some have called a “hawkish pause,” with rates held steady for now but the door left open for further increases, Jefferson said that “a decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle.”