The Nasdaq and S&P 500 posted their fourth straight record closing high on Thursday, while Treasury yields fell to their lowest since early April. Investors reacted to lower-than-expected inflation data and a modest rate-cutting outlook from the Federal Reserve.
The dollar strengthened against major currencies as the Fed's hawkish stance and the prospect of trade tensions between Europe and China sent European stocks sharply lower.
The Dow Jones Industrial Average ended the day slightly lower. The Labor Department reported that producer prices fell 0.2% in May from the previous month, though they rose 2.2% year-on-year, 20 basis points above the Fed's 2% inflation target.
Separately, initial jobless claims hit a 10-month high. The data came after a weaker-than-expected consumer price index report on Wednesday and a revision to the Fed's forecasts, which now call for only one rate cut this year instead of three.
"After a solid rally, markets are taking a bit of a break from yesterday's big news, and that's a good thing," said Ryan Detrick, chief market strategist at Carson Group in Omaha, Neb. "We call it the calm after the storm — consolidating the gains we saw in the first half of June."
Despite the Fed's hawkish rhetoric, expectations are growing that the central bank will cut rates for the first time as soon as September.
According to CME's FedWatch tool, financial markets are pricing in a 60.5% chance of the Fed cutting its target rate by 25 basis points in September.
"The Fed may sound hawkish, but they are dependent on economic data," Detrick said. "With today's positive PPI data, the market is thinking the Fed could ease if inflation continues to decline."
The Dow Jones Industrial Average (.DJI) fell 65.17 points, or 0.17%, to 38,647.04. The S&P 500 (.SPX) rose 12.71 points, or 0.23%, to 5,433.74, and the Nasdaq Composite (.IXIC) added 59.12 points, or 0.34%, to 17,667.56.
The S&P 500 and Nasdaq hit record closing highs for the fourth straight session on Thursday, driven by a continued rally in tech stocks.
The number of Americans filing new jobless claims last week, while another report showed an unexpected decline in producer prices in May, bolstering hopes for an early Fed rate cut.
The Federal Reserve on Wednesday forecast only one rate cut this year, down from three quarter-percentage-point cuts in March.
The S&P 500 tech sector (.SPLRCT) jumped 1.4% and the semiconductor index (.SOX) rose 1.5%, both hitting record closing highs.
Broadcom (AVGO.O) shares soared 12.3% after raising its revenue forecast for chips used in artificial intelligence technology. The company also announced a 10-for-1 forward stock split.
Nvidia (NVDA.O) rose 3.5%, while Apple (AAPL.O) rose 0.5%.
Adobe (ADBE.O) shares rose more than 14% in after-hours trading after the software maker beat Wall Street's second-quarter revenue expectations. However, the stock was down 0.2% in the main session.
New data released Wednesday showed that the consumer price index was unchanged in May for the first time in nearly two years, raising concerns among some investors that the economy could be slowing too much.
The economically sensitive industrial sector (.SPLRCI) fell 0.6%, while the Russell 2000 small-cap index (.RUT) fell 0.9%.
Tesla (TSLA.O) shares rose 2.9% after shareholders approved Elon Musk's $56 billion pay package.
Trading volume on U.S. exchanges was 10.14 billion shares, below the 20-day average of 12.49 billion.
European shares ended wider lower, with the auto sector particularly hard hit as investors worried about Beijing's retaliatory measures to the European Union's new tariffs on electric vehicles from China.
The pan-European STOXX 600 index (.STOXX) fell 1.31%, while MSCI's global share index (.MIWD00000PUS) lost 0.27%.
Emerging market shares rose 0.64%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.67%, while Japan's Nikkei (.N225) fell 0.40%.
U.S. 10-year Treasury yields fell on weak economic data.
Benchmark 10-year notes rose 13/32, sending yields down to 4.2442% from 4.295% late Wednesday.
30-year notes rose 27/32, sending yields down to 4.4% from 4.45% late Wednesday.
The dollar index (.DXY) rose 0.53%, while the euro fell 0.64% to $1.0738.
The Japanese yen weakened 0.22% against the greenback to hit $157.09 per dollar, while sterling was last at $1.2761, down 0.27% on the day.
Oil prices edged up amid choppy trading, with supply growth and a delayed Fed rate cut offset by economic data.
The price of U.S. crude oil rose 0.15% to $78.62 per barrel, while the price of Brent rose 0.18%, stopping at $82.75 per barrel.
Gold prices fell amid a stronger dollar after the release of the PPI report, which was weaker than expected. Spot gold lost 0.8%, reaching $2,303.15 per ounce.
