NEW YORK (AP) – Wall Street’s record rally continued on Wednesday poor reports on the US economy kept the door open for possible interest rate cuts.
The S&P 500 rose 0.5% to set an all-time high for the second straight day and 33rd time this year. The Dow Jones Industrial Average fell 23 points, or 0.1%, while the Nasdaq composite added 0.9% to its record set the day before. Trading ended early for the day ahead of the Fourth of July holiday.
Tesla again helped lift the market and rose 6.5% the following day reporting a slight decline in sales for the spring than analysts had feared. It was one of the strongest forces pushing up the S&P 500, along with Nvidia. The darling of Wall Street rush into artificial intelligence technology rose 4.6% to bring the chip company’s year-to-date profit to 159%.
Action was strongest in the bond market, where Treasury yields fell after a flurry of weaker-than-expected reports on both the labor market and US services companies. Data can save Federal Reserve on track to deliver interest rate cuts later this year, as Wall Street wants.
A report said activity for businesses in the real estate sector, retail trade and other service industries in the US contracted in June for only the third time in 49 months. The reading was weaker than the forecasts of economists, who were only looking for a slowdown in growth. Perhaps most importantly for Wall Street, the report from the Institute of Supply Management also said prices were rising at a slower pace.
This followed reports from earlier in the morning that indicated a slowdown in the labor market. One said slightly more US workers applied for unemployment benefits last week than economists expected, although the number remains low compared to history. Another from ADP showed that non-government employers slowed their hiring last month, when economists had forecast an acceleration.
The hope on Wall Street is that the economy will soften by just the right amount: enough to keep a lid on it upward pressure on inflation, but not enough to put workers out of work and cause a recession. A much-anticipated report will arrive on Friday, when the US government will provide its comprehensive update on how many workers employers added to their payrolls during June.
The yield on the 10-year Treasury fell to 4.35% from 4.44% late Tuesday, a notable move for the bond market, and most of the slide came after the report on US services businesses. It has generally fallen since April on hopes that inflation is slowing enough for the Federal Reserve to cut its key interest rate from the highest level in more than two decades.
Wednesday’s move erased some of the recent rally in yields. Last week’s debate between President Joe Biden and former President Donald Trump prompted some traders to make moves in anticipation of a Republican sweep. in November, which would freeze the possibility of tax cuts and other policies this could cause the US government debt to increase.
The two-year Treasury yield, which most closely tracks expectations for Fed action, fell to 4.70% from 4.75% late Tuesday. Traders are now betting on a nearly three-in-four chance that the Federal Reserve will cut its key interest rate in September, according to data from CME Group.
On Wall Street, Constellation Brands fell 3.3% after swinging between gains and losses for the day. The company behind Modelo beer and Robert Mondavi wines reported stronger-than-expected profit for the latest quarter, but its revenue fell well short of financial analysts’ forecasts.
Still, the S&P 500 rose 28.01 points to 5,537.02. The Dow fell 23.85 to 39,308.00, and the Nasdaq composite gained 159.54 to 18,188.30.
This is a traditionally strong time of year for Wall Street, according to Mark Hackett, Nationwide’s head of investment research. He said the first half of July has been the best two-week stretch for stocks on the calendar since 1928, and the S&P 500 has risen in July for nine straight years.
Although discouraging reports I have shown Lower-income American families are struggling to keep up with inflation still high, “the glass-half-full investor mentality continues to drive markets higher,” Hackett said.
In stock markets abroad, indexes rose across much of Europe and Asia. France’s CAC 40 rose 1.2% to recoup more of its losses on worries of a swing from central government policies could lead to higher debts for the French government.
The FTSE 100 rose 0.6% in London before a the upcoming UK electionwhile Tokyo’s Nikkei 225 rose 1.3%.
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AP Business writers Yuri Kageyama and Matt Ott contributed.