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Wall Street retreats from record highs

written by Bella Palmer

The S&P 500 and Nasdaq extended their streak of intraday all-time highs before retreating

Wall Street shares retreated from record highs hit early on Thursday, while other indexes globally rallied, as Treasury yields shook off soft U.S. data and rose anticipating new supply next week.

The dollar firmed, as higher U.S. yields widened differentials with non-dollar rates that are trending lower. It drew closer to the 160 yen area that prompted Tokyo to intervene in late April to support the yen.

The DJIA was the only major index that held gains. The S&P 500 and Nasdaq extended their streak of intraday all-time highs before retreating, and the Nasdaq ended a seven-session string of record closing highs.

Disappointing housing and building permits data, along with a jobless claims report indicated a gradual cooling in the labour market, seemed to make the case that the Fed's restrictive policy is having its intended effect.

The weaker-than-expected economic data is suggesting that the higher-for-longer interest rates are achieving the Fed's objectives, according to Greg Bassuk, chief executive officer at AXS Investments in New York. These signs of a slightly slowing economy are going to be welcomed by the Fed as they consider a move toward interest rate cuts.

This, along with dovish sentiment expressed by the BoE as it held off easing before the looming British general election, and an interest rate cut by the Swiss National Bank, seemed to give the Federal Reserve some manoeuvring room over the timing of its first interest rate cut.

Minneapolis Federal Reserve President Neel Kashkari said while the U.S. economy has proven resilient, he sees some softening.

Even so, expectations for a rate cut as soon as September have faded a bit. Financial markets are currently pricing in a 57.9% possibility of a 25-bp rate cut in September, down from 61.1% a week ago, according to CME's FedWatch tool.

The Dow added 0.77% to end at 39,134.96, the S&P 500 shed 0.25% to 5,473.22, and the Nasdaq Composite shed 0.79% to end at 17,721.59.

Wall Street's rally has been driven by enthusiasm over AI, led by chipmaker Nvidia, which recently claimed the mantle as the world's most valuable company in terms of market cap. Nvidia also reversed morning gains and was down nearly 2%.


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