S&P 500, Nasdaq hit nine-month highs after new wage report

The S&P 500 and Nasdaq Composite finished at their highest levels in nine months on Thursday as new data showed that wage inflation had slowed down, raising expectations that the Federal Reserve would pause its monetary tightening campaign.

The S&P 500, which tracks stocks of the top 500 American companies, added 41.26 points or 0.99 percent to conclude the trading session at 4,221.09. The tech-leaning Nasdaq finished the trading session at 13,100.98, gaining 165.70 points or 1.28 percent. The Dow Jones also ended in the green for the day, rising by 154.09 points or 0.47 percent to 33,062.36.

Nvidia Corp was the best performer in the S&P 500, adding 5.12 percent to $397.70 after the chipmaker forecast higher-than-expected revenue from its artificial intelligence (AI) business.

Meta stock boosted the Nasdaq by recording a 2.98 percent increase after the tech company introduced its next-generation virtual reality headset, the Quest 3.

Salesforce became one of the biggest weights in the Dow, posting a 4.7 percent drop after the cloud-based software firm reported the slowest revenue growth in 13 years.

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Shares of Pure Storage rose by 19.07 percent to $34.28 after the technology company posted “strong” first-quarter earnings. On the other hand, C3.ai declined by 13.2 percent after the AI company projected an annual revenue below the market’s estimates.

Goldman Sachs declined by 2.3 percent after the large bank announced plans to further reduce its workforce, saying that the uncertainty in the macroeconomic environment weighs on dealmaking. Dollar General also plummeted by 19.5 percent after the retailer slashed its full-year sales projection.

The S&P 500 is poised to conclude the week 0.4 percent higher. The Nasdaq is on track to post a nearly one percent gain this week, the sixth consecutive weekly gain for the index. Meanwhile, the Dow is expected to lose 0.1 percent for the week.

Management service firm ADP reported that wages grew by 6.5 percent year-over-year in May, lower than the 6.7 percent hit the month before, indicating a slowdown. The Labor Department also said the price of labor per output grew by 4.2 percent in Q1, a downward revision from the 6.3 percent growth rate estimated last month.

"Unit labor cost data for the first quarter normally doesn't trigger a reaction. But it signaled a significant improvement."

Edward Moya, OANDA senior market analyst

OANDA senior market analyst Edward Moya said the new data made the market confident about a rate hike pause, not only in June but also in July. Fed fund futures now show a 76.2 percent probability that the U.S. central bank will “skip” a rate hike in the next policy meeting.

Congress approves debt ceiling bill

In addition to the expectations of the Fed’s future monetary policy, the debt ceiling standoff among top American lawmakers also influenced the equity market over the past few weeks. Congress recently approved the Fiscal Responsibility Act, suspending the national debt limit until January 1, 2025.

President Joe Biden, who directly participated in debt ceiling negotiation with House Speaker Rep. Kevin McCarthy, praised Congress for its timely action, saying he would sign the bill into law as soon as possible. The debt agreement involved federal spending cuts for the following fiscal year.

Congress's approval ensures that the U.S. can avoid a default, which the Treasury Department predicts can come as soon as June 5. A failure to meet its payment obligations will push the U.S. economy into a recession, affecting global markets.

Analysts said the news would increase risk appetite among investors, prompting a rally in various risk markets, including the stock market.