The stock market rode a big rally in software stocks to fresh highs on Thursday despite another hot inflation report.
The S&P 500 rose 0.6%. The Nasdaq gained 0.9%. Both hit fresh closing highs after doing so on Wednesday. The Dow rose 25 points to post a slight gain and eke out a fresh record, too.
Blowout earnings from Snowflake gave software stocks a much-needed boost. The sector has taken a beating from investors betting that AI upstarts will make some enterprise software firms redundant. Healthcare stocks also had a big day, but the Dow didn’t include some of the big winners in that rally, such as Eli Lilly and Gilead Sciences.
The yield on the 2-year Treasury note dipped to 4.02%. The 10-year yield fell to 4.45%.
The Federal Reserve’s preferred inflation gauge, the core PCE, rose at a 3.3% annual rate in April, up from 3.2% in March. The headline PCE rose 3.8% from 3.5% in March in the wake of the Iran war oil price spike.
The second estimate for first-quarter gross domestic product growth was 1.6%, compared to a prior estimate of 2%.
“While markets are increasingly pricing in a potential rate hike in December, we do not believe the data is strong enough to justify that move at this stage,” writes Raymond James chief economist Eugenio Alemán. “We expect the Fed to remain data-dependent and patient.”
Traders see a 54.3% chance interest rates hold steady through the end of the year, according to the CME FedWatch Tool. Odds of a quarter-point rate hike are at 36.3%, while odds of a half-point in hikes or more are at 9.3%.
The Nasdaq will enter the final session of May on pace for its best two-month stretch since 2009, according to Dow Jones Market Data.