Wall Street closes mixed amid signs of easing inflation
The Nasdaq has ended at its highest intraday level in more than eight months, boosted by a slightly lower than expected increase in April inflation and Alphabet Inc's latest artificial intelligence rollout.
The Labor Department's Consumer Price Index (CPI) rose 4.9 per cent in April from a year ago, compared with expectations of a 5 per cent increase, raising hopes that the Federal Reserve's interest rate hiking cycle is close to an end. Month-over-month CPI in April rose 0.4 per cent after gaining 0.1 per cent in March.
"Markets reacted positively because they saw the inflation data as a small positive," said Michael Harris, president at hedge fund Quest Partners LLC.
"The Fed is in a pause now. They've done their last rate hike and they're going to wait and see for the next couple of months."
The Nasdaq was helped by a 4.10 per cent climb in Alphabet as the company rolled out more artificial intelligence for its core search product in response to competition from Microsoft Corp.
Large-cap tech stocks including Apple Inc and Microsoft also gained 1.04 per cent and 1.73 per cent, respectively.
The rate-sensitive S&P 500 technology sector index went up 1.22 per cent and the communication services rose 1.69 per cent.
"The CPI is indicating some sort of relief in inflationary pressure. That would mean the Fed would be toward the end or already at the end of its interest rate cycle, and growth companies are most heavily affected by higher interest rates," said Kevin W. Philip, a partner at investment adviser Bel Air.
Growth companies rely more on borrowed money so they benefit from lower rates.
Fed funds futures traders are pricing in a pause in rate increases at the central bank's June meeting and less than a 5.0 per cent chance of another 25 basis point hike.
"The market is pricing in a Fed cut beginning this summer. While inflation is decelerating, it's not decelerating at a pace that would justify cutting the Fed funds rate anytime before the fourth quarter of 2023," said Matthew Palazzolo, senior investment strategist at Bernstein Private Wealth Management.
Indexes were choppy during the session, as investors digested the positive inflation print with concerns about the looming debt ceiling.
Talks on raising the US federal government's $US31.4 trillion ($A46.5 trillion) debt ceiling entered a new phase on Wednesday as some areas of potential compromise emerged after Tuesday's White House meeting.
The Dow Jones Industrial Average fell 30.48 points, or 0.09 per cent, to 33,531.33; the S&P 500 gained 18.47 points, or 0.45 per cent, at 4,137.64; and the Nasdaq Composite added 126.89 points, or 1.04 per cent, at 12,306.44.
Volume on US exchanges was 11.04 billion shares compared with the 10.7 billion average for the full session over the last 20 trading days.
Regional bank shares extended declines from volatile sessions last week on concerns about the sector's health.
PacWest Bancorp and Zions Bancorporation inched lower 0.49 per cent and 2.74 per cent respectively.
Oil and gas producer Occidental Petroleum Corp fell 3.58 per cent after its first-quarter earnings fell short of analysts' estimates.
Livent Corp rose 5.24 per cent after Australian lithium miner Allkem Ltd agreed to merge with the US-based chemical manufacturing firm to create a $US10.6 billion firm.
Airbnb Inc lost 10.92 per cent as the holiday rental booking company had fewer bookings and lower average daily rates in the second quarter.
Rivian Automotive jumped 1.80 per cent after the electrical vehicle maker beat estimates for its first-quarter results and reiterated its annual production forecast.
Advancing issues outnumbered decliners on the NYSE by a 1.32-to-1 ratio; on Nasdaq, a 1.40-to-1 ratio favoured advancers.
The S&P 500 posted 18 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 86 new highs and 152 new lows.