Wall Street closes subdued as investors sit, wait for inflation data

FILE PHOTO: People walk around the Financial District near the New York Stock Exchange (NYSE) in New York, U.S., December 29, 2023. REUTERS/Eduardo Munoz/File Photo

By Ankika Biswas, Lisa Pauline Mattackal and Carolina Mandl

(Reuters) -U.S. stocks ended Thursday around the unchanged mark as investors awaited fresh inflation data, with the Nasdaq able to eke out a slight gain after data showed a continued slowdown in economic activity, raising investors' hope for rate cuts.

"The market is in a bit of a holding pattern here for the PCE because there hasn't been a lot of big catalysts," said Ross Mayfield, investment strategy analyst at Baird, about the release of the monthly personal consumption expenditures (PCE) price index - the Federal Reserve's preferred inflation gauge - on Friday.

Data showed new orders for key U.S.-manufactured capital goods unexpectedly fell in May, while core durable goods orders fell 0.1% versus forecasts for a 0.2% rise, boosting investor beliefs that a weaker economy could prompt the Federal Reserve to cut interest rates in September.

Weekly jobless claims fell to 233,000, missing expectations of 236,000. Further, a final print showed the U.S. economic growth increased more than estimated in the first quarter.

Benchmark 10- and 2-year yields, which move inversely to prices, dropped after the data showed a continued, but moderated slowdown in economic activity, while the 7-year yields edged lower after a $44 billion auction.

Megacap stocks, such as Alphabet and Meta Platforms, firmed as U.S. Treasury yields slipped, up 0.83% and 1.25%. Amazon rose 2.19% after hitting $2 trillion in market value for the first time on Wednesday.

The Dow Jones Industrial Average rose 36.53 points, or 0.09%, to 39,164.33, the S&P 500 gained 5.16 points, or 0.09%, to 5,483.06 and the Nasdaq Composite gained 53.53 points, or 0.30%, to 17,858.68.

Market participants have highlighted concerns over the rally's sustainability and have called out for the need to diversify portfolios to hedge against possible sharp losses.

Meanwhile, investors have largely stuck to their view of around two rate cuts this year, as per LSEG's FedWatch data, even though the Fed has projected only one, and a 59.5% chance of a cut in September.

In a policy essay, Atlanta Fed President Raphael Bostic said inflation "appears to be narrowing" and that should allow rates cuts later this year, while governor Michelle Bowman reiterated that she is still not ready to support a central bank rate cut with inflation pressures still elevated.

"What we've been looking forward for most of the week is kind of that preponderance of evidence to tip the scales on what is the direction for inflation," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

Micron fell 7.11% after an in-line fourth-quarter revenue forecast disappointed investors hoping for more upside from the memory chipmaker's performance in the artificial intelligence boom.

Nvidia was down 1.90%, continuing its recent turbulent ride.

Walgreens Boots Alliance slumped 22.16% after cutting its 2024 profit forecast and announcing plans to close more underperforming U.S. stores.

Denim maker Levi Strauss tumbled 15.4% after falling short of expectations for second-quarter revenue.

Advancing issues outnumbered decliners by a 1.62-to-1 ratio on the NYSE. There were 168 new highs and 78 new lows on the NYSE.

The S&P 500 posted 9 new 52-week highs and 2 new lows while the Nasdaq Composite recorded 41 new highs and 118 new lows.

Volume on U.S. exchanges was 9.49 billion shares, compared with the 11.74 billion average for the full session over the last 20 trading days.

(Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru; Editing by Maju Samuel and Aurora Ellis)