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Comm services, tech, energy lead quarterly sector gains

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US fourth-quarter growth revised up; weekly jobless claims

fall

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Walgreens gains after quarterly earnings

(Updated at 4:00 p.m. ET/ 2000 GMT)

By Chuck Mikolajczak

NEW YORK, March 28 (Reuters) - The S&P 500 closed out

the week with modest gains on Thursday, with the benchmark index

notching its strongest first quarter in five years, as investors

digested the latest batch of economic data while looking towards

the next inflation reading.

Each of the three main U.S. indexes were set for solid

quarterly gains, led by a climb of more than 10% for the S&P

500, aided by optimism over artificial intelligence (AI) related

stocks and expectations the U.S. Federal Reserve will begin to

cut interest rates this year.

The blue-chip Dow sat less than 1% away from

breaching the 40,000 level for the first time.

Data on Thursday showed the U.S. economy grew faster than

previously estimated in the fourth quarter, partly due to strong

consumer spending, while a separate report showed initial

jobless claims indicated the labor market remains on solid

footing.

"The economy is in pretty good shape, the consumer is in

pretty good shape and still spending, unemployment is still on

the low side, and there continues to be pockets where the

economy is thriving ... So there's money that is wanting to be

spent in a variety of different ways," said George Young,

portfolio manager at Villere & Company in New Orleans.

"And then you've got that carrot that the Fed's kind of

holding out there saying, we may just be lowering and we may

just be lowering, and everybody's trying to parse their words."

While U.S. equity markets will be closed for the Good Friday

holiday, the focus will be on the release of the Personal

Consumption Expenditures Price Index (PCE), the Fed's preferred

inflation gauge, for clues on the timing and size of rate cuts

this year from the central bank.

According to preliminary data, the S&P 500

gained 6.81 points, or 0.13%, to end at 5,255.30 points,

while the Nasdaq Composite lost 20.06 points, or 0.12%,

to 16,379.46. The Dow Jones Industrial Average rose 36.16

points, or 0.09%, to 39,796.24.

Overnight, Fed Governor Christopher Waller said recent

disappointing inflation data affirms the case for the central

bank to hold off on cutting its short-term interest rate target,

but did not rule out trimming rates later in the year.

Markets are pricing in a roughly 64% chance the Fed will cut

rates by at least 25 basis points (bps) in June, according to

CME's FedWatch Tool.

While communication services, energy and

tech were the best performing of the 11 major sectors

this quarter, only real estate suffered a decline.

Walgreens Boots shares rose after its quarterly

earnings in which it recorded an impairment charge on its

investment in clinic operator VillageMD.

Home Depot ( HD ) slipped after the home improvement

retailer said it would buy building materials supplier SRS

Distribution in an $18.25 billion deal in its largest

acquisition.

Estee Lauder ( EL ) jumped after BofA Global Research

upgraded the cosmetics giant's rating to "buy" from "neutral".