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Traders add to Fed rate cut bets as inflation eases

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Nike ( NKE ) slumps after results

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Infinera ( INFN ) jumps after Nokia to buy company

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Indexes up: Dow 0.16%, S&P 0.27%, Nasdaq 0.31%

(Updated at 11:56 a.m. ET/1556 GMT)

By Ankika Biswas and Lisa Pauline Mattackal

June 28 (Reuters) -

The Nasdaq and the S&P 500 touched record highs on Friday

after an in-line inflation report strengthened hopes for

interest rate cuts in September, while Nike ( NKE ) was set for its

steepest one-day fall in over two decades after a gloomy

forecast.

Data showed U.S.

monthly inflation

was unchanged in May, an

encouraging development

after the strong price increases earlier this year raised

doubts over the efficiency of the Federal Reserve's monetary

policy.

The Commerce Department report also showed consumer

spending rose marginally last month, fueling optimism that the

central bank could engineer a much-desired "soft landing" for

the economy.

Bets of a rate cut in September picked up after the

data, last standing at near 66%, LSEG FedWatch data showed.

"We've been expecting some cooling in PCE numbers for

quite some time and it has taken longer than we expected, but it

now confirms that the inflationary pressure is cooling off a bit

and that should be a positive for risk assets, especially equity

markets," said Bel Air Investment Advisors' chief investment

officer, Arun Bharath.

Traders have held their bets of two cuts despite Fed

projections of just one this year, hoping for a sustained

downtrend in inflation and as the economy remains susceptible to

decades-high interest rate.

The S&P 500 information technology index was the

top sectoral gainer, while utilities fell to the

bottom with a 1% decline.

Top chip stock Nvidia ( NVDA ) firmed 1.5%, while others

including Marvell Technology ( MRVL ), Qualcomm ( QCOM ),

Applied Materials ( AMAT ) and Intel ( INTC ) rose 1.1%-3%,

helping the Philadelphia SE Semiconductor index gain 1.9%

to a one-week high.

However, some megacaps fell after Treasury yields reversed

their early course and inched up. Meta Platforms ( META ),

Alphabet and Amazon.com ( AMZN ) were down between

0.6% and 1%.

Further, San Francisco Fed President

Mary Daly

acknowledged the cooling inflation, and noted that it's

"good news that policy is working."

Among others, Nike ( NKE ) slumped 18.9% after forecasting a

surprise drop in fiscal 2025 revenue, weighing on the broader

consumer discretionary sector.

At 11:56 a.m. ET, the Dow Jones Industrial Average

was up 61.15 points, or 0.16%, at 39,225.21, the S&P 500

was up 14.70 points, or 0.27%, at 5,497.57, and the Nasdaq

Composite was up 55.05 points, or 0.31%, at 17,913.74.

Investors also geared up for the final reconstitution of the

Russell benchmark indexes during the day.

Both the S&P 500 and the Nasdaq were set for gains in a

week marked by a short-lived rout in AI-related stocks,

Amazon.com ( AMZN ) hitting $2 trillion market value for the first time,

some quarterly earnings, and a mixed bag of economic data.

While the two indexes were set for quarterly gains, the

Dow was set to end the quarter down 1%, highlighting the

divergence between the more tech-heavy indexes and the rest of

the market.

Among individual stocks, optical networking gear maker

Infinera ( INFN ) jumped 18.3% after Nokia said it

would acquire the company in a $2.3 billion deal.

Advancing issues outnumbered decliners by a 1.73-to-1

ratio on the NYSE and by a 1.32-to-1 ratio on the Nasdaq.

The S&P index recorded 15 new 52-week highs and one new low,

while the Nasdaq recorded 46 new highs and 82 new lows.