S&P 500 surges to 14-month high as traders bet US rates near peak

  • May retail sales rise unexpectedly, jobless claims flat
  • China ADRs climb on more rate cuts
  • Kohl’s up after TD Cowen upgrade
  • Indexes: S&P 500 +0.99%, Nasdaq +0.89%, Dow +1.16%

June 15 (Reuters) – The S&P 500 and Nasdaq jumped to 14-month highs on Thursday as investors digested fresh economic data and bet that the U.S. Federal Reserve is nearing the end of its aggressive interest-rate hike campaign.

Treasury yields slid after a slew of economic data pointed to easing inflation, helping offset worries about future rate hikes.

Data showed U.S. retail sales unexpectedly rose in May as consumers spent on a range of goods including vehicles. Another data set showed jobless claims were unchanged at a seasonally adjusted 262,0000 for the week ended June 10, but were above economists’ forecast of 249,000 claims.

Additionally, import prices fell in May and the annual decrease was the sharpest in three years. That followed a report on Tuesday showing April headline inflation increased by less than expected.

The latest wave of data came after Fed left rates unchanged at the 5%-5.25% range on Wednesday and indicated it may hike by at least half a percentage point this year as inflation remains stubbornly persistent and the U.S. economy stays resilient.

“Due to softer inflation data earlier this week and resilient economic data after the Fed meeting, the market is rallying and yields are falling because investors don’t believe the Fed is as hawkish as they presented,” said Ross Mayfield, an investment strategy analyst at Baird.

“The market doesn’t believe they have two more hikes in the chamber.”

Traders see a 67% chance of a 25-basis point rate hike in July, followed by a potential rate cut by December, according to the CME Fedwatch tool.

Thursday’s gains were broad and included sectors viewed as sensitive to swings in the health of the economy. Ten of the 11 S&P 500 sector indexes rose, led by health care (.SPXHC), up 1.37%, followed by a 1.22% gain in energy <.SPNY> as oil prices rallied. .

U.S. Treasury yields pulled back, lifting shares of rate-sensitive growth stocks. Microsoft (MSFT.O) and Meta Platforms (META.O) gained over 2% each.

“There is a great deal of money on the sidelines of people who’d been scared of recession, and as the worries go away people are returning to equities,” said David Russell, vice president of Market Intelligence at TradeStation.

So far in 2023, the S&P 500 is up 15% and the Nasdaq has climbed 31%, fueled by signs of economic resilience, a better-than-expected earnings season and bets that interest rates are near their peak.

The S&P 500 was up 0.99% at 4,415.69 points.

The Nasdaq gained 0.89% to 13,747.56 points, while the Dow Jones Industrial Average was up 1.16% at 34,371.99 points.

Kroger Co (KR.N) dropped 2.8% after the big-box retailer missed first-quarter revenue estimates.

Kohl’s Corp (KSS.N) rose 1.1% after TD Cowen upgraded the department store operator to “outperform” from “market perform”.

U.S.-listed shares of Chinese companies Alibaba Group and JD.com each rose over 3% after the People’s Bank of China cut the borrowing cost for its medium-term policy loans for the first time in 10 months.

Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX) by a 5.0-to-one ratio.

The S&P 500 posted 36 new highs and no new lows; the Nasdaq recorded 59 new highs and 65 new lows.

Reporting by Shristi Achar A and Sruthi Shankar in Bengaluru and by Noel Randewich in Oakland, Calif.; Editing by Vinay Dwivedi and Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Shristi is a correspondent, part of the markets team reporting on the stock markets across U.S., UK, Canada, Europe and Emerging markets.