Record Highs for Nasdaq and S&P 500 Amid Economic Softening

The S&P 500 and Nasdaq achieved record closes amidst signs of a weakening economy, raising hopes for a Federal Reserve interest rate cut in September. Meanwhile, the Dow remained mostly unchanged. Market trends suggest an overall loosening labor market, buoyed by weaker-than-expected PMI and factory order data.

The S&P 500 index and technology-laden Nasdaq rose on Wednesday to post record high closes, as data pointing to a softening economy raised hopes the Federal Reserve could cut interest rates in September.

The Dow Jones Industrial Average closed little changed after spending most of the session lower, pressured by selling in healthcare and consumer stocks during a shortened trading session ahead of the Fourth of July. The market will stay closed on Thursday for U.S. Independence Day, keeping trading volumes thin throughout the week. Both the ADP Employment report and weekly jobless claims data pointed to easing labor market conditions ahead of Friday's closely watched non-farm payrolls report. Markets hope signs of weakness in the labor market will encourage the Fed to cut interest rates.

"It's quite a strong unemployment claims number, and it's fitting in with an overall trend that's probably an indication of loosening up in the jobs market. It must be quite welcoming for the Fed," said David Morrison, Trade Nation senior market analyst. Also,

PMI data from the Institute for Supply Management was weaker than expected, and factory orders unexpectedly slumped. Investors boosted bets of a September rate cut to over 70%, as per LSEG's FedWatch.

The Fed's June meeting minutes are due after the market closes. Tesla jumped, trading near a six-month high after rising more than 10% on Tuesday following a smaller-than-expected drop in second-quarter vehicle deliveries.

The Philadelphia SE Semiconductor Index rose, helped by gains in the U.S. listing of Taiwan Semiconductor Manufacturing and Broadcom. Nvidia closed higher, after slipping on Tuesday, while other mega-stocks were weaker such as Amazon .

"The tendency at the moment is towards rotation ... we have quite a few days where we see the Russell down, and tech up and vice versa," Morrison said, though noting that the market's optimism around megacap tech stocks was still strong. The S&P 500 has jumped over 15% in the first half of 2024, largely supported by top-tier high momentum technology-related stocks. The benchmark index's equal-weighted counterpart only rose 5% and small and mid-cap stocks have significantly lagged.

According to preliminary data, the S&P 500 gained 27.82 points, or 0.50%, to end at 5,536.83 points, while the Nasdaq Composite gained 159.54 points, or 0.88%, to 18,188.30. The Dow Jones Industrial Average fell 26.41 points, or 0.07%, to 39,305.44. Paramount Global extended gains after Shari Redstone's National Amusements reached a preliminary deal to sell its controlling interest in the media giant to David Ellison's Skydance Media.

First Foundation slumped after the lender, which holds a huge portfolio of multifamily real estate loans, disclosed a $228 million unexpected capital raise.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)