(Reuters) – The S&P 500 index touched a record high on Thursday, driven Wall Street’s expectations that the Federal Reserve will cut interest rates as soon as next month to keep the U.S.-China trade war from stalling economic growth.
The U.S. central bank left rates unchanged at the end of its two-day policy meeting on Wednesday, but pledged to “act as appropriate” to sustain economic health.
Wall Street’s main indexes have gained in recent weeks on expectations of a rate cut and hopes of a revival of trade talks between the United States and China at the Group of 20 meeting next week in Japan.
The benchmark S&P 500 index, which has risen about 7% so far in June, hit an intraday record high of 2,956.20 on Thursday.
“It was always going to be difficult for the Fed to live up to high market expectations. While the bar was set high, policymakers appear to have cleared it with ease while also leaving themselves with plenty of outs,” said Craig Erlam, senior market analyst at OANDA in London.
A more-than-expected dovish Fed led to U.S. Treasury bond yields tumbling, with the benchmark 10-year yields dropping below 2% for the first time in more than 2-1/2 years.
The energy index jumped 1.92%, the most among the 11 major S&P sectors, as oil prices surged over 5% on renewed tensions in the Middle East after Iran shot down a U.S. military drone.
“This new high on the S&P 500 could be fool’s gold,” warned Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “We have this simmering tension in Iran that could spill over and create all kinds of global fears.”
At 2:41 p.m. ET, the Dow Jones Industrial Average was up 0.78% at 26,710.42 points, while the S&P 500 gained 0.76% to 2,948.59.
The Nasdaq Composite added 0.6% to 8,035.07.
Apple rose 0.7% and briefly hit $200 for the first time since early May. The iPhone maker is viewed as a major potential casualty in Trump’s trade war, should it worsen.
The technology sector rose 1.13%, boosting the S&P 500 by the most, with Oracle Corp leading the charge.
Oracle’s shares jumped 8.1% after the business software maker forecast current-quarter profit above estimates. Its gain fueled the S&P 500 more than any other stock.
Cruise operator Carnival Corp slid 8.2%, the most among S&P companies, after cutting its profit forecast for the year on the Trump administration’s sudden ban on cruises to Cuba and weakening demand in Europe over political uncertainty.
Rivals Royal Caribbean Cruises Ltd and Norwegian Cruise Line Holdings Ltd dropped about 3% each.
Buoying sentiment was data which showed the number of Americans filing applications for unemployment benefits fell more than expected last week, pointing to underlying labor market strength despite a sharp slowdown in job growth in May.
Advancing issues outnumbered declining ones on the NYSE by a 3.15-to-1 ratio; on Nasdaq, a 1.52-to-1 ratio favored advancers.
The S&P 500 posted 97 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 119 new highs and 40 new lows.
Additional reporting by Shreyashi Sanyal and Aparajita Saxena in Bengaluru; Editing by Nick Zieminski