S&P 500, Nasdaq ride AI wave to end at record highs; Dow flat on weak retail sales

By Echo Wang

(Reuters) -Wall Street’s main indexes were barely changed on Tuesday in subdued pre-holiday trading as investors focused on softer-than-expected U.S. retail sales data.

“The most important item in the market today is the soft retail sales,” said Jim Awad, senior managing director at Clearstead Advisors LLC in New York. “Markets are trying to digest today’s numbers.”

Retail sales rose 0.1% in May, versus the 0.3% growth forecast by economists polled by Reuters, while another report showed surprisingly strong May industrial production and manufacturing output.

Following the news, markets slightly increased bets on two Federal Reserve interest rate cuts this year, LSEG’s FedWatch showed, despite U.S. central bankers’ most recent projections for just one easing.

Nvidia (NASDAQ:) overtook Microsoft (NASDAQ:) to become the world’s most valuable company, with its shares climbing 3.2% to $135.21.

Other chip stocks also extended their recent rally, boosting the to a record high.

Qualcomm (NASDAQ:), Arm Holdings (NASDAQ:) and Micron (NASDAQ:) were up between 2.5% and 8.0%, with Micron hitting a record high.

The Nasdaq remained flat following six consecutive record closing highs, with losses in Alphabet (NASDAQ:), Amazon (NASDAQ:) and Meta Platforms (NASDAQ:) offsetting chip stock gains.

Technology () was the top sector gainer, up 0.6%, while communication services led declines.

Investors remained focused on comments from Fed officials throughout the day. New York Fed President John Williams said rates will come down gradually over time, while Richmond Fed’s Thomas Barkin said he required more months of economic data before supporting a rate cut.

Some market observers noted nothing surprising emerged. “That’s why the markets stay unchanged today,” Awad said.

U.S. markets will be closed on Wednesday for the Juneteenth holiday.

Hopes for multiple rate cuts this year, excitement for AI-related companies and robust earnings from other tech firms have bolstered equities in recent months, with gains concentrated in a few heavily weighted stocks.

Citigroup raised the year-end target for the S&P 500 to 5,600 points from 5,100.

At 02:51 p.m. the rose 17.37 points, or 0.04%, to 38,795.54. The S&P 500 edged up 9.72 points, or 0.18%, to 5,483.08 and the gained 0.40 points, or 0.00%, at 17,857.05.

Edtech company Chegg (NYSE:) jumped 10.9% after announcing job cuts in a restructuring.

Homebuilder Lennar (NYSE:) fell 4.9% after forecasting lower-than-expected third-quarter home deliveries.

Advancing issues outnumbered decliners by a 1.86-to-1 ratio on the NYSE, which had 220 new highs and 76 new lows.

The S&P 500 posted 48 new 52-week highs and six new lows while the Nasdaq Composite recorded 58 new highs and 168 new lows.