Stocks fall as traders await PCE.

Awaiting PCE | Wall Street traders sent stocks down and bonds up after the latest round of economic data signaled a slowdown in momentum. Data showed the US grew at a softer pace than previously estimated — as both spending and inflation were marked down. Economic cooling means officials could have room to cut interest rates this year, but that might also be a concern for consumption and corporate profits. The S&P 500 dropped to 5,235, led by tech losses, while the Nasdaq 100 fell 1%. Federal Reserve Bank of New York President John Williams said he expects inflation to continue falling. Treasury two-year yields dropped five basis points to 4.92%. The dollar retreated. Ahead, traders are focused on the Fed’s preferred price gauge. Economists expect the personal consumption expenditure price index minus food and energy to have risen 0.2% in April, the smallest advance so far this year. Separately, Trump Media & Technology Group shares dropped as much as 15% after a jury found Donald Trump guilty of multiple felonies at his hush-money trial, making him the first former US president to be convicted of crimes.

Stocks and bonds drop on rate outlook.

Wall Street weighs data. Photo: Michael Nagle/Bloomberg

Stocks Drop | US stocks and bonds fell on Thursday after surprisingly strong economic data caused traders to reduce bets that the Federal Reserve will cut rates this year. Rate-sensitive real estate and utility companies were the biggest casualties as the S&P 500 had its worst day in May. The yield on 10-year Treasuries climbed to the highest in more than a week. Nvidia, which on Wednesday reported better-than-expected results and a bullish outlook, bucked the trend by climbing 9.3% to a record high. Tech was the only S&P 500 sector to close higher, but even the Nasdaq 100 fell.

The Dow touches 40,000.

Intraday record | US stocks hovered near their all-time highs, with the Dow Jones Industrial Average touching 40,000 on bets that rate cuts will keep powering Corporate America. The oldest of Wall Street’s three main stock indexes has been boosted by prospects of a resilient economy, ebbing inflation, and robust earnings. Traders also kept a close eye on a series of Fed speakers. Three said the central bank should keep borrowing costs high for longer as they await more evidence that inflation is easing, suggesting they’re not rushing to cut interest rates. Treasury 10-year yields rose four basis points to 4.38% while the dollar bounced back.

US stocks move toward record high.

Room to rally | The S&P 500 traded less than 1% away from its all-time high, climbing to its highest level since early April. Equites are extending a rebound fueled by speculation that the Federal Reserve will be able to cut rates this year as higher-than-estimated jobless claims reinforced bets on policy easing. The advance in stocks has also been attributed to commodity trading advisers — who surf momentum — being modeled to buy shares this week. To Doug Ramsey at Leuthold, another 10% gain in the S&P 500 isn’t out of the question statistically. He analyzed 80 years of data on bull-market rallies, focusing on those that happened when unemployment was this low and the economic cycle this mature. If the current rally meets the prior records for length and level, the S&P 500 would end the year at 5,705. Elsewhere, a $25 billion sale of 30-year bonds saw good demand. Treasury 10-year yields declined four basis points to 4.46%.

US stock outlook remains rosy.

Optimistic outlook | A sturdy economy will sustain the bull-market run in US stocks even without Federal Reserve interest-rate cuts, said Bank of America’s Savita Subramanian. Although optimistic that the economy will avoid a severe downturn, Subramanian said the biggest challenge will be if growth slows while inflation remains elevated. She also sees the Fed trimming interest rates as early as December, or possibly not this year. Stocks halted a two-day drop, with Nvidia leading gains in chipmakers. The S&P 500 topped 5,060, while the tech-heavy Nasdaq 100 climbed 1.3%. In late trading, Apple climbed after reporting that sales declined less sharply than feared last quarter, helped by stronger-than-expected demand in China. Elsewhere, Treasury 10-year yields fell five basis points to 4.58%.