Stock market today: Wall Street climbs thanks to hopes of future interest rate cuts

NEW YORK (AP) U.S. stocks closed higher following a surprisingly encouraging inflation update. The S&P 500 rose 0.9% on Wednesday, closing at a new record high, after the Federal Reserve also reassured that it still views an interest rate cut as likely this year. The Nasdaq Composite Index rose 1.5%, also beating the all-time high set a day earlier. The Dow Jones Industrial Average lagged the market and slipped 0.1%. Treasury yields fell in the bond market after the morning report showed a slowdown in consumer price inflation during the month of May. The yield on the 10-year Treasury note fell to 4.33%.

THIS IS A LATEST UPDATE. Earlier AP story follows below.

NEW YORK (AP) U.S. stocks climb Wednesday after surprising rise encouraging update on inflation. The Federal Reserve also assured that its policymakers I still see a cut to interest rates, which is what Wall Street deeply desires, as it probably will this year.

The S&P 500 was up 1% in afternoon trading and on track to reach its all-time high set the day before. The Nasdaq Composite Index also relied on its own record and was up 1.9% as of 3 p.m. Eastern Time. The Dow Jones Industrial Average lagged the market and was almost flat.

Action was even stronger in the bond market, where Treasury yields fell after the report showed U.S. consumers paid 3.3% higher prices for food, insurance and everything remains last month, compared to a year earlier. Economists had expected an inflation rate stuck at 3.4%.

For Wall Street, a slowdown in inflation does not only help American households I have trouble following with prices rising rapidly, this also opens the door to the Federal Reserve lower its main interest rate. Such a move would ease pressure on the economy and boost investment prices.

Everything from bitcoin to gold to copper rallied after inflation data raised expectations of upcoming interest rate cuts. Investor nervousness about U.S. stocks has also eased.

For its part, the Federal Reserve kept its main interest rate unchanged on Wednesday following its last policy meeting.

Policymakers welcomed Wednesday's inflation update, but they need more reliable data to boost our confidence, Fed Chairman Jerome Powell said. He reiterated the Fed's mantra that it needs an accumulation of data showing that inflation is moving sustainably toward its 2% target before lowering the federal funds rate, which is at its highest level since more than two decades.

We'll have to see where the data lights the way, he said, reiterating the Fed's commitment to evolving based on the direction of upcoming reports.

The Fed finds itself in a difficult situation, with many issues at stake. Cutting interest rates too soon or too sharply could allow inflation to reaccelerate, while waiting too long would unnecessarily harm the economy.

This is an important decision for the economy, and it must be done correctly, Powell said.

The Fed said Wednesday that most of its policymakers still expect at least one interest rate cut at some point this year. They also raised their forecasts for the number of reductions in 2025.

The Fed cut its forecast for rate cuts this year to three, after progress appeared to stall earlier this year in reducing inflation. Such a cut was widely expected, and traders are still betting heavily on the first of two potential rate cuts this year, coming in September, according to CME Group data.

Sectors of the stock market that tend to benefit the most from falling interest rates have been the best performers.

Small businesses that need to borrow to grow and feel the effects of rising interest rates more than their rivals led the market. The smallest stocks in the Russell 2000 index jumped 2.2%.

Real estate values ​​have also climbed. Lower interest rates mean bonds pay less interest, which can lead potential investors to look at dividend-paying property owners. Office owner Boston Properties jumped 3.3%.

Lower interest rates could also lead to a decline mortgage rates and inject energy into the real estate market. Homebuilder DR Horton climbed 3.6%.

Oracle helped lift Wall Street with a 12.9% jump, even though it reported a weaker profit for the latest quarter than analysts expected. Financial analysts pointed to strong bookings, including contracts related to artificial intelligence training.

The furore around AI has helped propel stocks to record highs despite concerns about high interest rates and the economic slowdown they bring. Nvidia was once again one of the most powerful forces pushing the S&P 500 higher, with a 3.7% gain. The microchip company has become the poster child of the AI ​​rush, and its total market value has surpassed $3 trillion.

The only company that pushed more on the S&P 500 than Nvidia was Apple, which jumped 6.1%. Its stock has jumped in the last two days after receiving an initial favorable reception to the announcement of several AI-related offerings coming to its operating systems.

In the bond market, the yield on 10-year Treasury bills fell to 4.29%, compared to 4.40% Monday evening and 4.60% a few weeks ago. The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 4.74% from 4.83% late Monday.

On foreign stock markets, European indices jumped following the publication of encouraging data on American inflation. In Asia, where markets closed before the data was released, indices were mixed. Japan's Nikkei 225 index lost 0.7% as investors await the Bank of Japan's latest interest rate announcement scheduled for Friday.

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AP Business writers Matt Ott and Elaine Kurtenbach contributed.

Stan Choe, Associated Press