S&P 500 and Nasdaq close at new highs as data fuels hopes for rate cuts

The S&P 500 index and the technology-heavy Nasdaq rose to record highs on Wednesday, as data indicating a slowing economy raised hopes that the Federal Reserve would cut interest rates in September.

The Dow Jones Industrial Average closed marginally down, weighed down by selling in healthcare and consumer industries during a brief trading session ahead of the Fourth of July. The market will be closed on Thursday to commemorate Independence Day in the United States, keeping trading volumes low throughout the week.

The ADP Employment report and weekly jobless claims data both pointed to softening labor market conditions ahead of Friday's carefully expected nonfarm payrolls report. Markets are hoping that signs of labor market weakness will prompt the Federal Reserve to lower interest rates.

"It's a strong jobless claims statistic, and it fits within a larger trend that suggests a loosening of the labor market. "It must be quite welcoming for the Fed," said David Morrison, senior market analyst at Trade Nation.

Also, the Institute for Supply Management's PMI data was weaker than expected, and factory orders fell unexpectedly. According to LSEG's FedWatch, investor bets on a September rate cut have increased by more than 70%.

The Fed's June meeting minutes are coming after the market closes.

Tesla (NASDAQ:TSLA) rose 6.5%, trading near a six-month high, after gaining more than 10% on Tuesday on the back of a smaller-than-expected dip in second-quarter vehicle sales.

The Philadelphia SE Semiconductor Index increased by 1.92%, boosted by gains in Taiwan Semiconductor Manufacturing and Broadcom's (NASDAQ:AVGO) US listings.

Nvidia (NASDAQ:NVDA) closed 4.6% higher after falling on Tuesday, while other mega-stocks, such as Amazon (NASDAQ:AMZN), closed 1.2% lower.

"The tendency at the moment is towards rotation... we have quite a few days where we have the Russell down and tech up, and vice versa," Morrison said, saying that the market's optimism about megacap tech firms remained high.

The S&P 500 has risen by more than 15% in the first half of 2024, aided primarily by top-tier high-momentum technology stocks. The benchmark index's equal-weighted counterpart only rose 5% and small and mid-cap stocks have significantly lagged.

The Dow Jones Industrial Average dipped 23.85 points, or 0.06%, to close at 39,308.00, the S&P 500 gained 28.01 points, or 0.51%, to 5,537.02 and the Nasdaq Composite climbed 159.54 points, or 0.88%, to 18,188.30.

Paramount Global rose almost 7% after Shari Redstone's National Amusements reached a preliminary deal to sell its controlling interest in the media giant to David Ellison's Skydance Media.

First Foundation (NYSE:FFWM) plummeted nearly 24% after the lender, which controls a vast portfolio of multifamily real estate loans, reported a $228 million unexpected capital raise.

Advancing issues outweighed decliners by a 2.65-to-1 ratio on the NYSE. The NYSE recorded 287 new highs and 50 new lows.

The S&P 500 saw 20 new 52-week highs and 4 new lows, while the Nasdaq Composite saw 51 new highs and 114 new lows.

The volume for the shorter session on U.S. exchanges was 7.11 billion shares, compared to the 11.64 billion average for the full session over the prior 20 days.