Wall St extends gains as rate-cut hopes linger By Reuters

By Sruthi Shankar and Shristi Achar A

(Reuters) – U.S. stock indexes rose on Tuesday, extending their recent run on expectations that the Federal Reserve will cut interest rates this year, while a drop in shares of Walt Disney (NYSE:) following the company’s quarterly results limited their gains.

Walt Disney fell 8.4% in early trading, as a surprise profit in its streaming entertainment division was eclipsed by a drop in its traditional TV business and weaker box office.

Despite Disney’s drag, the three main U.S. stock indexes were trading at their strongest level in more than three weeks after a weaker-than-expected labor market report last week fueled bets that the U.S. central bank will ease monetary policy this year.

The report and better-than-expected earnings reports have helped soothe jittery investors, who sent markets lower in April, on concerns that sticky inflation and a robust economy would prompt the Fed to keep rates higher for longer.

“The market is still pricing inflation will ultimately be conquered, maybe not down to 2%, but certainly under 3%. The central banks will win there and the cost will be a slower economy,” said Hal Reynolds, chief investment officer at Los Angeles Capital Management.

“That will happen sometime later this year or early next year and these rate cuts will come. But there is still a fair bit of noise. I don’t think things are much clearer today than they were two months ago.”

Traders currently anticipate rate cuts of 46 basis points (bps) from the Fed by the end of 2024, according to LSEG’s interest rate probabilities app, with the first pivot to rate cut priced in for September and another in December.

Meanwhile, Minneapolis Fed President Neel Kashkari said housing market strength and potentially stalled progress on inflation targets mean monetary policy may not be as tight as Fed officials think it is.

Ten of the 11 sectors rose, with consumer staples leading advances, up 0.8%.

At 09:46 a.m. ET, the rose 60.27 points, or 0.16%, to 38,912.54, the S&P 500 gained 8.89 points, or 0.17%, to 5,189.63 and the gained 20.85 points, or 0.13%, to 16,370.09.

The earnings season has been largely supportive for markets. Of the nearly four-fifth of the S&P 500 companies that reported first-quarter results through Friday, 76.8% topped analysts’ profit estimates, as per LSEG data. In a typical quarter, 67% beat earnings estimates.

Nvidia (NASDAQ:) fell 1.1% after the Wall Street Journal reported that Apple (NASDAQ:) was developing its own chip to run artificial intelligence (AI) software in data centers.

Apple gained 1.5% ahead of an event later on Tuesday where it is expected to unveil new iPads.

Tesla (NASDAQ:) fell 2.3% after data showed the U.S. automaker sold 62,167 China-made electric vehicles in April, down 18% from a year earlier.

Palantir Technologies (NYSE:) tumbled 13% after the data analytics firm’s annual revenue forecast fell short of analysts’ estimates.

Advancing issues outnumbered decliners by a 2.69-to-1 ratio on the NYSE and a 1.54-to-1 ratio on the Nasdaq.

The S&P 500 posted 32 new 52-week highs and one new low while the Nasdaq recorded 74 new highs and 35 new lows.