S&P, Nasdaq hit record highs as tepid inflation data fans rate cut bets

s&p, nasdaq hit record highs as tepid inflation data fans rate cut bets

FILE PHOTO: A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in New York City, New York, U.S., July 19, 2021. REUTERS/Andrew Kelly/File Photo

By Bansari Mayur Kamdar and Shristi Achar A

(Reuters) - The benchmark S&P 500 and Nasdaq hit record highs in early trade on Wednesday after a lower-than-expected increase in a key inflation metric bolstered hopes of interest rate cuts from the Federal Reserve this year.

The blue-chip Dow was set to breach the 40,000-mark for the first time and the other two major indexes surpassed all-time peaks hit in March, after the lukewarm U.S. consumer prices data for April led traders to slightly raise bets that the Fed will cut its policy rate in September and again in December.

"What the data does for the Fed is it establishes the first in what they are going to need to be a series of softer CPI reports for them to be able to cut later this year," said Jason Pride, chief of investment strategy and research at Glenmede.

"If there were concerns that they weren't going to cut at all, this just alleviated some of those concerns."

Separately, U.S. retail sales came in unexpectedly flat in April as higher gasoline prices pulled spending away from other goods, indicating that consumer spending was losing momentum.

At 09:42 a.m. ET, the Dow Jones Industrial Average rose 210.56 points, or 0.53%, to 39,768.67, the S&P 500 gained 30.39 points, or 0.58%, to 5,276.98 and the Nasdaq Composite gained 96.94 points, or 0.59%, to 16,608.12.

Equities built on gains made on Tuesday, when Fed Chair Jerome Powell's assessment of U.S. growth and inflation reassured investors as they digested hotter-than-expected producer prices for April.

Stocks have rallied so far this year on better-than-expected earnings for the first quarter and expectations that the Fed will be able to cool inflation without badly hurting growth and eventually transition to cutting interest rates.

Rate-sensitive real estate stocks outpaced other sectoral indexes with a 1.7% gain.

Most megacap growth and technology stocks also rose in early trading, with Nvidia leading gains.

Retail investor darling GameStop fell 21%, set to snap this week's rally that was driven by "Roaring Kitty" Keith Gill, a central figure behind the 2021 meme stock frenzy, posting on social media platform X.

Other meme stocks AMC Entertainment and Koss Corp dropped 17.3% and 20.9%, respectively.

Advancing issues outnumbered decliners by a 3.96-to-1 ratio on the NYSE and by a 2.81-to-1 ratio on the Nasdaq.

The S&P 500 posted 43 new 52-week highs and no new lows while the Nasdaq recorded 153 new highs and 25 new lows.

(Reporting by Bansari Mayur Kamdar and Shristi Achar A in Bengaluru; Additional reporting by Ankika Biswas; Editing by Sriraj Kalluvila and Devika Syamnath)

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