GLOBAL MARKETS-S&P 500, Nasdaq notch record closing highs ahead of CPI, Fed decision

BY Reuters | ECONOMIC | 06/11/24 04:23 PM EDT

(Updates to 16:07 EDT)

By Stephen Culp

NEW YORK, June 11 (Reuters) - The Nasdaq and the S&P 500 rose on Tuesday to end at all-time highs, reversing early losses as investors prepared for upcoming inflation data and the U.S. Federal Reserve's policy meeting.

Benchmark Treasury yields extended their decline ahead of the Labor Department's Consumer Price Index (CPI) report.

Apple (AAPL) shares helped put the tech-heavy Nasdaq out front, while the blue-chip Dow Jones Industrial Average ended lower. The S&P 500 also turned green as Fed policy makers convened for their two-day policy meeting.

"Investors are playing it safe, with tomorrow's CPI report even though it's expected to show a slight decline," said Sam Stovall, chief investment strategist of CFRA Research in New York.

"(But) we continue to see all-time highs, and you don't want to make emotional decision," Stovall added. "CPI could come in weaker than expected, and the Fed could sound optimistic that at least one rate cut could occur before year-end."

While investors expect no change to the Fed funds target rate, the Federal Open Markets Committee (FOMC) is expected to release its Summary of Economic Projections, which should help illuminate the central bank's forward policy path.

The data-reliant Fed will watch whether the CPI data due early Wednesday shows, as expected, that inflation was still meandering down toward the central bank's 2% annual target.

The report follows Friday's hotter-than-expected U.S. wage growth numbers.

French President Emanuel Macron's announcement that he will call a flash election kept adding fuel to the fire of a tumultuous year in geopolitics, which has boosted the dollar.

"With Europe leaning to the right, with Modi losing his majority, and Mexico's election, change is in the air," Stovall said, "more uncertainty in Europe will add to the strength of the U.S. dollar."

The Dow Jones Industrial Average fell 120.62 points, or 0.31%, to 38,747.42, the S&P 500 gained 14.53 points, or 0.27%, to 5,375.32 and the Nasdaq Composite added 151.02 points, or 0.88%, to 17,343.55.

European shares extended the previous session's losses sparked by political uncertainties in France, as investors turned their focus to the Fed.

The pan-European STOXX 600 index lost 0.93% and MSCI's gauge of stocks across the globe shed 0.06%.

Emerging market stocks lost 0.41%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.64% lower, while Japan's Nikkei rose 0.25%.

U.S. Treasury yields dipped after a well-received auction ahead of the CPI data.

Benchmark 10-year notes last rose 18/32 in price to yield 4.3981%, from 4.469% late on Monday.

The 30-year bond last rose 33/32 in price to yield 4.5318%, from 4.595% late on Monday.

The dollar gained some ground against a basket of world currencies, touching a four-week high in anticipation of the CPI inflation report, while the euro dropped amid political turmoil brought about by far right gains in European elections and the snap election in France.

The dollar index rose 0.09%, with the euro down 0.22% to $1.0739.

The Japanese yen weakened 0.03% to 157.11 per dollar, while sterling was last trading at $1.274, up 0.08% on the day.

Crude oil prices edged higher after the Energy Information Administration (EIA) raised its world oil demand forecast.

U.S. crude rose 0.21% to settle at $77.90 per barrel, while Brent settled at $81.92 per barrel, up 0.36% on the day.

Gold prices reversed an earlier drop and were last modestly higher as investors kept their focus on the Fed's economic outlook.

Spot gold added 0.2% to $2,315.46 an ounce.

(Reporting by Stephen Culp; Additional reporting by Wayne Cole in Sydney and Alun John in London; Editing by Susan Fenton and David Gregorio)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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