S&P 500, Nasdaq at records despite Fed seeing fewer rate cuts in 2024

NEW YORK, United States — European and US stocks mostly rose Wednesday after data showed US inflation slowed in May, with Wall Street indices holding onto records even after the Federal Reserve projected fewer interest rate cuts in 2024.

Both the S&P 500 and Nasdaq finished at records for the third straight day.

The Fed left its key lending rate unchanged and penciled in just one rate cut this year, down from the three expected in March.

READ: US Fed holds interest rates, now sees just one cut this year

The move came after inflation rated at 3.3 percent last month, down 0.1 percentage point from April, slightly below expectations.

Fed chair Jerome Powell welcomed the inflation data but added that the US central bank needs to see more “good inflation readings” before it gains sufficient confidence to consider cutting interest rates.

READ: US inflation cooled in May in a sign that price pressures may be easing

Art Hogan from B Riley Wealth Management characterized the inflation report as “unambiguously good,” while viewing the market’s acceptance of fewer interest rate cuts as reflecting that investors are “likely willing to forgo rate cuts for better economic data.”

Apple’s new AI offerings

The Nasdaq led the major US indices, winning 1.5 percent following another big gain by Apple after the tech giant unveiled new artificial intelligence offerings. Other large AI-focused companies such as Microsoft and Nvidia also gained.

Oracle jumped 13.3 percent despite mixed earnings as analysts pointed to enthusiasm over new partnerships with Open AI and Google.

Elsewhere, European markets closed sharply higher after falling earlier this week in the wake of the far-right’s strong performance in the elections to the EU Parliament.

French President Emmanuel Macron said he was seeking an alliance against political extremes in snap elections, adding that he aimed to keep the far right from succeeding him in 2027 when he steps down.

Macron was speaking at a rare domestic news conference three days after the far-right upended his presidency and spurred him to call risky early polls by recording more than double the score of his ruling party in European elections.

Kathleen Brooks, research director at trading platform XTB, said markets were “calmed” by a commitment from Macron that he would not resign on the outcome of the election.