NEW YORK (AP) — Most U.S. stocks are rising Thursday after the latest update on inflation bolstered Wall Street’s belief that relief on interest rates may come as soon as September.
Four out of every five stocks in the S&P 500 index were climbing, though pullbacks for Microsoft, Nvidia and some other influential companies masked that underlying strength. These stocks have surged amid a frenzy around artificial-intelligence technology, causing critics to say they have become too pricey, and they helped drag the S&P 500 down 0.9% from its all-time high set a day before.
The dips for Big Tech stocks also pulled the Nasdaq composite down 1.8% from its own record, while the Dow Jones Industrial Average was 27 points higher, or 0.1%, as of 12:26 p.m. Eastern time.
Still, the direction was decidedly upward for the majority of stocks on Wall Street, particularly housing-related companies, real-estate owners and others that tend to benefit the most from easier interest rates. BXP, the company that owns Boston’s Prudential Center and other high-profile office developments across the country, climbed 4.6% for one of the market’s bigger gains.
Smaller companies that have been lagging behind the market’s behemoths for a while were also strong, and the Russell 2000 index of smaller stocks leaped 3% to lead the market decisively.
The action was even stronger in the bond market, where yields tumbled as tracders’ bets built for the Federal Reserve to soon begin lowering its main interest rate. It’s been sitting for nearly a year at its highest level in more than two decades.
Wall Street wants lower interest rates because that can release pressure built up on the economy due to how expensive it’s become to borrow money to buy houses, cars or anything on credit cards. Fed officials, though, have been saying they want to see “more good data” on inflation before making a move. They’ve kept rates high to intentionally put downward pressure on the economy, hoping to fully snuff out the worst inflation in generations.
Wall Street sees Thursday’s report, which showed milder increases than expected for prices of gasoline, cars and other things U.S. consumers bought during June, as providing just that.
“One word: pivotal,” said Lindsay Rosner, head of multi-sector investing within Goldman Sachs Asset Management. “With three inflation prints between this morning and September’s Fed meeting, today’s print was crucial in helping the Fed gain confidence inflation is still moving in the right direction.”
Following the report’s release, Treasury yields tumbled immediately. The yield on the 10-year Treasury dropped to 4.18% from 4.28% late Wednesday and from 4.70% in April. That’s a major move for the bond market and provides a big lift for stock prices.
The two-year Treasury yield, which more closely tracks expectations for Fed action, eased to 4.50% from 4.62% late Wednesday.
The lower yields helped the majority of the U.S. stock market to rise. Real-estate owners and utilities led the way because falling bond yields make their relatively high dividends look more attractive to investors seeking income.
Real-estate investment trusts in the S&P 500 jumped 2.6% for the biggest gain by far among the 11 sectors that make up the index. Utility stocks were the second-best in the index with a gain of 1.6%.
Homebuilders were also strong on hopes that lower mortgage rates will juice the industry. PulteGroup rose 5.8% and D.R. Horton climbed 6.3% for some of the biggest gains in the S&P 500. Mohawk Industries, which makes flooring for homes, jumped 6.1%.
Besides hopes for coming cuts to interest rates, expectations for strong profit growth amid a resilient but slowing economy have also helped to push the U.S. stock market to records. Analysts expect S&P 500 companies to deliver their best growth in more than two years this upcoming reporting season, but it’s getting off to a mixed start.
Delta Air Lines lost 5.1% after reporting slightly weaker revenue and profit for the spring than analysts expected. The airline said demand is strong for peak summer travel, but it also gave a profit forecast for the current quarter that fell short of Wall Street’s estimates.
Conagra Brands fell 2.2% even though its profit for the latest quarter beat expectations. Revenue for the company behind Birds Eye, Duncan Hines, and Marie Callender’s fell short of analysts’ forecasts. Conagra also gave a forecast for profit in its upcoming fiscal year that was below analysts’. The food company said customers are still getting used to higher prices.
PepsiCo slipped 0.2% despite likewise topping profit forecasts for the spring. Its revenue for the latest quarter came in a bit shy of analysts’ expectations, and the company said an underlying measure of revenue will likely come in at the bottom of its earlier forecasted range for the full year.
On the winning end was WD-40, which rose 2.9% after reporting stronger profit and revenue than analysts expected.
In stock markets abroad, Japan’s Nikkei 225 rose 0.9% to set another all-time high.
Indexes were also strong across much of the rest of Asia and Europe.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.