The S&P 500 and Nasdaq closed at record highs on Thursday, buoyed by tech stocks linked to AI, while inflation data and comments from Federal Reserve officials helped shape expectations for the timing of the central bank’s interest rate cuts. Canada’s main stock index also rallied, as investors cheered results from Canadian Natural Resources and the major banks as well as domestic data showing stronger-than-expected economic growth.
Heavyweight chipmaker Nvidia advanced 2.08% as one of the biggest boosts to the benchmark S&P index and Nasdaq while smaller rival Advanced Micro Devices surged 9.06%. Those and other technology companies have been the centerpiece of a Wall Street rally in recent months, fueled by optimism over growth prospects related to artificial intelligence.
Dell Technologies, which sells AI-optimized servers made with Nvidia’s high-end processors, shot up 15% in post market trading after reporting an earnings beat. It had already risen 1.5% during the regular session.
Traders added to bets the Fed will cut rates in June, according to CME’s FedWatch Tool, after a Commerce Department report showed U.S. prices picked up in January in line with expectations amid strong gains in the costs of services. The personal consumption expenditures (PCE) price index rose 0.3%. Data for December was revised lower to show the PCE price index gaining 0.1%, rather than 0.2% as previously reported. In the 12 months through January, PCE inflation rose 2.4% - the smallest year-on-year increase since February 2021.
“Without kind of a hawkish surprise here, which it wasn’t, it was soft or at least in line, then there’s no real reason for the market to expect the Fed to get more hawkish than they already outlined,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
“It doesn’t matter what you think they should do. It’s what they say they’re going to do and once again, the market has been wrestled back into line to where the Fed said they’d be.”
The two-year U.S. Treasury yield, which reflects interest rate expectations, fell 0.4 basis points to 4.644%, while the yield on the benchmark 10-year note slid 1.2 basis points to 4.262%.
Atlanta Fed President and voting member Raphael Bostic on Thursday stressed taking data-dependent approach to monetary policy, saying it was going to be a bumpy path to the Fed’s 2% inflation target, and repeated his view that he sees the central bank cutting rates “in the summer months.”
Chicago Federal Reserve Bank President Austan Goolsbee said improvements last year in the supply of goods and the labour market paved the way for inflation declines this year, indicating he remains supportive of rate cuts later this year.
Reports on consumer and producer prices earlier in February, which pointed to stubborn inflation, had led investors to dial back expectations of rate cuts to June. At the beginning of this year, traders viewed March as the likely starting point for the Fed’s easing cycle.
In other U.S. economic data, initial jobless claims for the week ended Feb. 24 stood at 215,000, greater than expectations of 210,000, economists polled by Reuters said.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 119.84 points, or 0.6%, at 21,363.61. For the month, it was up 1.6%, its fourth straight monthly gain. That’s the longest monthly winning streak since 2021.
Shares of Canadian Natural Resources jumped 5.1% after the company beat estimates for fourth-quarter profit on record production, and raised its quarterly dividend by 5%.
The energy sector rose 1.9%, while heavily weighted financials added 0.7% after TD Bank and Canadian Imperial Bank of Commerce reported better than expected earnings. TD shares added 1.1% and CIBC was up 2.2%.
“There’s a little sigh of relief that the (banks’) outlooks aren’t worsening yet,” said Barry Schwartz, portfolio manager at Baskin Financial Services.
The Canadian economy exceeded expectations in the fourth quarter, with GDP expanding at an annualized rate of 1%, fresh data showed Thursday
The materials sector, which includes precious and base metals miners and fertilizer companies, contributed to the rally. It gained 1% as gold and copper prices rose.
On Wall Street, the Dow Jones Industrial Average rose 47.37 points, or 0.12%, to 38,996.39. The S&P 500 gained 26.51 points, or 0.52%, to 5,096.27 and the Nasdaq Composite advanced 144.18 points, or 0.90%, to 16,091.92.
The Nasdaq closed above its prior record high of 16,057.44 set on Nov. 21, 2021, while the S&P bested its closing record of 5,088.80 set just last week.
For the month, the S&P 500 gained 5.17%, the Nasdaq jumped 6.12%, and the Dow climbed 2.22%. Each of the three major indexes registered a gain for February, their fourth straight monthly advance. The Russell 2000 Small Cap index rose 5.45% for the month.
Gains on the Dow were held in check, partly by a 1.59% fall in Boeing after a report of a probe by the Department of Justice.
Snowflake slumped 18.14% after the cloud data analytics company forecast first-quarter product revenue below Wall Street estimates and said CEO Frank Slootman was retiring.
Advancing issues outnumbered decliners by a 2.7-to-1 ratio on the NYSE while on the Nasdaq, advancing issues outnumbered decliners by about a 1.57-to-1 ratio. The S&P 500 posted 65 new 52-week highs and one new low and the Nasdaq recorded 267 new highs and 82 new lows. Volume on U.S. exchanges was 13.88 billion shares, compared with the 11.78 billion average for the full session over the last 20 trading days.
Reuters, Globe staff