US stocks rose to record highs on Tuesday, led again by technology companies, as some of Wall Street's most influential companies returned to action.
The Standard & Poor's 500 index jumped 1.1% to reach an all-time high last week. The Dow Jones Industrial Average rose 0.6%, and the Nasdaq Composite jumped 1.5%.
All three indexes started the day with losses after an upcoming inflation report said US consumers paid slightly higher prices last month than economists expected. Worse-than-expected data kept the door closed on hope that the Federal Reserve could implement long-awaited interest rate cuts at its meeting next week.
But inflation numbers remain close to expectations, and traders are holding out their hopes that a longer-term downward trend means the Fed will begin hoped-for cuts in June. This helped stock indices reverse their losses as the day progressed.
Additionally, inflation may not actually be as hot as the morning report suggested.
“January and February are noisy months for a lot of economic data,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“The Fed was not planning to cut rates next week, and this report doesn't change that. The discussion around the table will be more about longer-term direction.
The fear is that “fixed” inflation that refuses to decline will force the Fed to keep interest rates high, negatively affecting the economy and investment prices. The Fed's key interest rate has already reached its highest level since 2001.
“Another hotter-than-expected CPI reading may breathe new life into the flat inflation narrative, but whether it will actually delay interest rate cuts is a different story,” said Chris Larkin, managing director of e-commerce trading and investing at Morgan Stanley. .
For months, Wall Street traders have been trying to get ahead of the Federal Reserve and guess when interest rates will be cut. They have already sent stock prices higher and bond yields lower in anticipation.
Through it all, the Fed has been “nothing if not consistent in doing what it said it was going to do,” Larkin said. “Until they say otherwise, their plan is to cut interest rates in the second half of the year.”
However, the immediate reaction across financial markets to the inflation data was halting and uncertain.
In the bond market, Treasury yields initially fell and then rose. The yield on the 10-year Treasury note eventually rose to 4.15% from 4.10% late Monday.
The price of gold also fluctuated, reaching record levels amid expectations of upcoming cuts in interest rates. An ounce for April delivery ended down $22.50 to settle at $2,166.10. Meanwhile, a measure of tension among investors in US stocks fell by more than 8% after swinging up and down several times.
On Wall Street, shares of major technology companies accounted for the bulk of the market's rise. Oracle shares jumped 11.7% after it announced stronger profits in the fourth quarter than analysts expected.
Nvidia stock also rose 7.2%, recovering from a rare two-day tumble. Wall Street's mania around artificial intelligence technology has inflated its stock, making it one of the most influential companies on the market. It was the strongest force that pushed the S&P 500 higher on Tuesday.
New York Community Bancorp rose 5.8% after it said it had terminated its previously announced deal to raise approximately $1.05 billion in cash from the stock sale. The bank is struggling under the weight of falling commercial real estate prices and growing pains associated with its previous acquisitions. Its problems have also raised concerns about the broader regional banking industry.
3M stock rose 5% after it said Bill Brown, former president and CEO of L3Harris Technologies, will take over as CEO of the company at the beginning of May.
On the losing end of Wall Street was Southwest Airlines. It fell 14.9% after it cut its forecast for an important measure of revenue in the first three months of this year, partly due to lower-than-expected demand from some leisure travelers.
It also said Boeing had told the company it would deliver fewer planes than expected this year. Shares of Boeing, which faces criticism over safety and manufacturing quality, fell 4.3%.
Overall, the S&P 500 index rose 57.33 points to 5,175.27 points. The Dow Jones index rose 235.83 points to 39,005.49 points, and the Nasdaq index advanced 246.36 points to 16,256.64 points.
In overseas stock markets, Japan's Nikkei 225 index fell 0.1%, further down from its recent records. Expectations are growing that the central bank will raise interest rates, which are below zero.
Indices jumped 3.1% in Hong Kong, 1.2% in Frankfurt, and 1% in London, but moved more modestly elsewhere across Asia and Europe.
Stan Choi writes for The Associated Press. AP Business Writers Ellen Kurtenbach and Matt Ott contributed to this report.
