Dow up, set to extend hot streak on investor rate-cut hopes

By Shristi Achar A and David French

(Reuters) -The tracked higher on Wednesday, on course for its sixth straight session of gains as investors kept betting on supportive U.S. monetary policy.

The other Wall Street benchmarks cooled a touch as momentum stalled and U.S. Treasury yields rose after the latest 10-year notes auction.

The benchmark was set to snap a four-session winning run, pressured by sliding shares of Uber (NYSE:) which posted a surprise quarterly loss and issued a downbeat forecast.

The ride-hailing platform’s shares shed 8.7%, the S&P 500’s biggest decliner, after it forecast second-quarter gross bookings would not meet expectations.

Tesla (NASDAQ:) fell 1.9% after Reuters reported U.S. prosecutors were examining whether the company committed securities or wire fraud by misleading investors and consumers about its electric vehicles’ self-driving capabilities.

Other megacap stocks such as Nvidia (NASDAQ:), Amazon (NASDAQ:) and Alphabet (NASDAQ:) slipped as the edged up.

Rising yields dampened optimism spurred by a positive earnings season and softer-than-expected labor market data that had tempered concerns about the Federal Reserve keeping interest rates higher for longer.

“We’ve had a lot of data that has come in soft, unexpectedly, and that’s fueled a bit of fire towards potentially a September rate cut,” said Alex McGrath, chief investment officer for NorthEnd Private Wealth.

“The bigger question becomes what the Fed is going to do when the macro data starts to deteriorate and inflation is not back to the target. Do they stick to their guns or do they ride to the rescue and start cutting rates? That’s kind of the pickle we’re looking at going into the summer months.”

With earnings season nearing an end and only a few economic data reports expected this week, investors are awaiting next week’s consumer prices data to gauge if inflation is cooling.

Traders are currently pricing in a 67% chance of the Fed cutting rates by at least 25 basis points in September, according to the CMEGroup’s Fedwatch tool, up from about 54% a week ago.

Investors took in additional comments from Fed speakers after the U.S. central bank’s policy meeting last week.

Boston President Susan Collins said the current setting of monetary policy will slow the economy in the way she believes will be necessary to get inflation back to the Fed’s 2% target.

Fed Governor Lisa Cook did not comment on monetary policy but said U.S. households, banks and firms are largely in solid financial shape, with strong enough buffers to absorb potential shocks.

Vice Chair Philip Jefferson was also due up later in the day.

At 02:00 p.m. EDT, the S&P 500 lost 2.36 points, or 0.05%, to 5,185.34 points, while the lost 38.24 points, or 0.24%, to 16,293.65. The Dow Jones Industrial Average rose 116.60 points, or 0.30%, to 39,000.86.

The majority of S&P sectors were trading down, with real estate and consumer discretionary among the biggest decliners.

Intel (NASDAQ:) fell 2.7% after warning of a sales hit from the U.S. revoking some of the chipmaker’s export licenses for China.

Tripadvisor tumbled 29% after the online travel agency ruled out a possible sale at this time and posted a surprise quarterly loss.

Uber rival Lyft (NASDAQ:) climbed 5.5% after projecting higher-than-expected gross bookings and a core profit for the current quarter.