Wall Street ends higher, sending Nasdaq to a record high

The front of the New York Stock Exchange is adorned with signs for the tool maker DeWalt in honor of the 100th anniversary of the company on Tuesday, May 14, 2024. Markets on Wall Street inched slightly higher ahead of the release of more inflation data from the U.S. government. (AP Photo/Peter Morgan)

NEW YORK  — Stocks rose on Wall Street Tuesday, pushing the Nasdaq composite to another record and leaving the S&P 500 sitting just shy of its own all-time high.

The late gains closed out a mostly wobbly day of trading as investors reviewed a mixed report on inflation and await an even more important inflation update on Wednesday. Stocks have been generally gaining ground in May following a dismal April.

The S&P 500 index rose 25.26 points, or 0.5 percent, to 5,246.68. It is sitting about 0.1% below its record high set in late March. The Dow Jones Industrial Average rose 126.60 points, or 0.3 percent, to 39,558.11.

The Nasdaq composite, which is heavily influenced by technology stocks, jumped 122.94 points, or 0.8 percent, to 16,511.18, setting a record high. The tech sector has been a driving force for much of the broader market’s gains this year.

Several “meme” stocks, including GameStop and AMC Entertainment, raced higher in a reprise of the social-media-driven frenzy of three years ago. GameStop jumped 60.1 percent and AMC rose 32 percent. Both stocks gave back much of their gains from earlier in the day.

READ: GameStop and AMC surge like it’s 2021

An update on inflation showed that prices remain stubbornly high at the wholesale level before many price changes are passed along to consumers. The latest producer price index showed that inflation rose sharply in April.

The report also included a revision lower for the March reading. The report is the first of two big inflation updates this week that are being closely watched by Wall Street.

“Inflation pressures in the U.S economy are still substantial and the momentum that built up over the last few years is still rolling along,” said Bill Adams, chief economist for Comerica Bank. “At the margin the Fed will see the April PPI report as another reason to slow-roll interest rate cuts.”

Bond yields edged lower

The yield on the 10-year Treasury slipped to 4.45 percent from 4.49 percent late Monday. The yield on the two-year Treasury, which more closely tracks expectations for actions by the Federal Reserve, fell to 4.82 percent from 4.86 percent.

The bigger test for markets comes Wednesday when the U.S. releases its monthly update on consumer prices, or inflation faced by households. Economists expect the consumer price index to ease to 3.4 percent in April on a year-over-year basis. The rate of inflation has been ticking higher in 2024, raising concerns that the Fed could have a hard time taming inflation to the central bank’s goal of 2 percent.

Investors have been curtailing their expectations for the speed and frequency of interest rate cuts this year as inflation remains hotter than expected. Traders are betting on one or two rate cuts this year, according to data from CME Group.

Wall Street is still hoping the Fed can pull off its “soft landing,” where high interest rates work to cool inflation without slowing the economy into a recession. The economy remains strong, but consumers might be showing signs of fatigue under the weight of stubborn inflation.

No rate hike despite stubborn inflation

Economists expect a retail sales report on Wednesday to show that consumer spending softened in April, just as it has over the last several months.

READ: US economy cooling in first quarter; inflation appears sticky

The latest round of earnings reports and company forecasts from retailers also show that consumers are struggling. Lower-income households are under a particularly heavy strain. Retail giant Walmart will report its latest financial results on Thursday, giving investors more insight into consumer spending habits.

Fed Chair Jerome Powell, at a panel discussion in Amsterdam on Tuesday, reaffirmed that the central bank won’t likely raise its key interest rate to respond to stubborn inflation. He also said that his confidence that inflation will ease is “not as high as it was” because price increases have been persistently hot in the first three months of this year.

Earnings have been a bright spot for markets, helping to support gains for major indexes in May after a rough April. Companies in the S&P 500 are mostly finished with their latest results, which show a 5.3% gain in earnings overall.

Stocks were mostly higher in Europe and mixed in Asia. Chinese markets slipped following U.S. plans to raise tariffs on imports from China.