Authors: Shruti Shankar and Shristi Achar A.
(Reuters) – U.S. stocks rose on Tuesday, extending recent gains on expectations that the Federal Reserve will cut interest rates this year, while Walt shares Disney (NYSE:) limited its earnings after its quarterly results.
Walt Disney shares fell 8.4% in early trading as a surprise profit from its streaming entertainment division was overshadowed by a decline in its traditional television business and weaker box office revenue.
Despite Disney’s resistance, the three major US stock indexes traded at their highest levels in more than three weeks after a weaker-than-expected labor market report last week boosted bets that the US central bank will ease monetary politics this year.
The report and better-than-expected earnings helped calm jittery investors who sent markets lower in April on concerns that persistent inflation and a resilient economy would prompt the Fed to keep rates high longer.
“The market is still pricing in that inflation will eventually be beaten, perhaps not to 2%, but definitely below 3%. Central banks will win, and the cost will be a slower economy,” said Hal Reynolds, chief investment officer of Los Angeles. Angeles Capital Management.
“It’s going to happen sometime later this year or early next year that these rate cuts are going to happen. But there is still a fair amount of noise. I don’t think things are much clearer today than they were two months ago.”
Traders currently expect the Fed to cut rates by 46 basis points (bps) by the end of 2024, according to LSEG’s Interest Rate Probabilities app, with the first turn to rate cuts scheduled for September and another in December.
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Meanwhile, Minneapolis Fed President Neel Kashkari said the strength of the housing market and a potential slowdown in progress toward inflation targets mean monetary policy may not be as tight as Fed officials think.
Ten of the 11 sectors rose, with consumer discretionary leading the gain (+0.8%).
At 9:46 a.m. ET, the S&P 500 was up 60.27 points, or 0.16%, at 38,912.54, and the S&P 500 was up 8.89 points, or 0.17%, at 5,189.63. and up 20.85 points, or 0.13%, to 16,370.09.
The earnings season has been largely favorable for markets. Of the nearly four-fifths of S&P 500 companies that reported first-quarter results through Friday, 76.8% beat analysts’ earnings estimates, according to LSEG data. In a typical quarter, 67% of companies beat earnings forecasts.
Nvidia (NASDAQ:) shares fell 1.1% after the Wall Street Journal reported that Apple (NASDAQ:) is developing its own chip to run artificial intelligence (AI) software in data centers.
Apple shares added 1.5% ahead of Tuesday’s event where the new iPads are expected to be unveiled.
Tesla (NASDAQ:) shares fell 2.3% after data showed the US automaker sold 62,167 Chinese-made electric vehicles in April, down 18% from a year earlier.
Palantir Technologies (NYSE:) shares fell 13% after the research firm’s full-year revenue forecast missed analysts’ estimates.
Advancing issues outnumbered declining ones by a 2.69-to-1 ratio on the NYSE and by a 1.54-to-1 ratio on the Nasdaq.
The S&P 500 posted 32 new 52-week highs and one new low, while the Nasdaq posted 74 new highs and 35 new lows.
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