By Sruthi Shankar and Noel Randewich
(Reuters) – U.S. stocks were mixed on Friday, while Nvidia hit a record high, as signs of easing price pressures and slowing economic growth fueled expectations the Federal Reserve is nearing the end of its aggressive interest rate hikes.
The S&P 500 and Nasdaq hovered near 14-month highs after economic data this week pointed to cooling inflation, eclipsing concerns about further rate hikes.
After holding rates steady on Wednesday, the U.S. central bank signaled borrowing costs could rise as much as half a percentage point by year-end. However, traders see the Fed pausing hikes or even cutting rates in December following an expected 25-basis-point rate hike in July, according CMEGroup’s Fedwatch tool.
Fed policymakers on Friday attempted to cool that optimism. Fed Governor Christopher Waller warned “core inflation is not coming down like I thought it would,” while Richmond Fed President Thomas Barkin said he was “comfortable” with further rate increases given that inflation was still not on the path back to 2%.
“I think the Fed will continue to jawbone the market’s enthusiasm down and say ‘No, we plan on raising two more times, but of course we are data dependent,'” said CFRA Research Chief Investment Strategist Sam Stovall.
Of the 11 S&P 500 sector indexes, seven rose, led by utilities, up 0.91%, followed by a 0.46% gain in energy. Consumer staples rose 0.3%.
“There are people who are going to fade the rally because the market has been insanely strong this year. So you’re getting a little bit of rotation into some defensive sectors,” said Jay Hatfield, chief executive at Infrastructure Capital Management.
U.S. consumers’ near-term inflation expectations dropped to a more than two-year low in June and the outlook over the next five years improved slightly, according to the University of Michigan’s survey that also showed sentiment perking up.
Nvidia Corp climbed 2.1% to a record high, lifting its market capitalization to $1.08 trillion. Morgan Stanley hiked its Nvidia price target and named the chipmaker its top pick among U.S. semiconductor firms.
U.S. stock markets will be closed on Monday for the Juneteenth holiday.
Fueled by strong gains in Nvidia and other megacaps, the S&P 500 has rallied about 3% this week, while the Nasdaq has surged 3.8%.
The Nasdaq was on track for its eighth consecutive week of gains, its longest streak of weekly advance since March 2019. The benchmark S&P 500 was on track to climb for a fifth straight week.
The Nasdaq declined 0.17% to 13,758.90 points, the S&P 500 was up 0.08% at 4,429.37 points, and the Dow Jones Industrial Average rose 0.06% to 34,428.23 points.
Adobe Inc gained 2.2% after the Photoshop maker’s earnings forecast surpassed analysts’ estimates.
Trading was expected to be volatile late in the session due to the simultaneous expiration of stock options, stock index futures and index options contracts.
iRobot Corp jumped 20% after Britain’s competition regulator cleared Amazon.com Inc’s planned $1.7 billion acquisition of the vacuum cleaner maker.
Micron Technology slipped 1.6% after warning of a bigger hit to global revenue from a Chinese ban on the sale of its memory chips to key domestic industries.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.1-to-one ratio.
The S&P 500 posted 24 new highs and no new lows; the Nasdaq recorded 95 new highs and 46 new lows.
(Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru and by Noel Randewich in Oakland, California; Editing by Vinay Dwivedi and Richard Chang)