NEW YORK (AP) — Wall Street's record rally continued Wednesday as a weak report on the U.S. economy left interest rate cuts open for possibility.
The S&P 500 rose 0.5%, hitting a new all-time high for the second consecutive day and its 33rd this year. The Dow Jones Industrial Average fell 23 points, or 0.1%, while the Nasdaq Composite Index rose 0.9% from its previous record. Trading ended early for the day in preparation for Independence Day on July 4.
Tesla again lifted the market, climbing 6.5% from the previous day after reporting a smaller decline in sales in the spring than analysts had feared. The company, along with Nvidia, was one of the strongest drivers of the S&P 500's gains. Wall Street's burgeoning darling in artificial intelligence technology rose 4.6%, bringing the semiconductor company's gains to 159% so far this year.
Read more: U.S. inflation is slowing again, but Fed Chairman Powell warns now's not the time to cut rates
Bond markets were more active, with Treasury yields falling after a series of weaker-than-expected reports from both the labor market and U.S. service companies, data that could put the Federal Reserve on track to cut interest rates later this year in line with Wall Street's hopes.
Wall Street wants the economy to soften just enough — enough to keep upward pressure on inflation in check, but not so much that workers lose their jobs and trigger a recession.
A report showed that business activity in real estate, retail trade and other U.S. service industries contracted for the third time in 49 months in June. The figure was weaker than expected by economists who had expected only slowing growth. Perhaps more importantly for Wall Street, a report from the Institute for Supply Management said the pace of price increases is slowing.
This followed earlier morning reports that showed the job market was slowing. One report said the number of U.S. jobless claims last week was slightly higher than economists had expected but still low compared to historical figures. Another report from ADP said nongovernment employers slowed their hiring last month, when economists had expected it to accelerate.
Wall Street is hoping the economy will soften just enough — enough to keep upward pressure on inflation at bay, but not so much that workers lose their jobs and trigger a recession.A more anticipated report comes on Friday, when the U.S. government is due to release a comprehensive update on how many workers employers added in June.
Read more: U.S. home sales fall again amid rising mortgage rates and record prices
The yield on the 10-year Treasury note fell to 4.35% from 4.44% late Tuesday in a notable move for the bond market. Much of the drop followed the U.S. services sector report. Yields have generally fallen since April on expectations that inflation is slowing and that the Federal Reserve will cut its key interest rate from its highest level in more than two decades.
Wednesday's move erased some of the recent recovery in yields. Last week's debate between President Joe Biden and former President Donald Trump prompted some traders to make moves in anticipation of a Republican sweep in November, which would increase the likelihood that tax cuts and other policies would inflate the U.S. government's debt.
The yield on the two-year Treasury note, which tracks closely with expectations of Fed action, fell to 4.70% from 4.75% late on Tuesday. Traders now see a nearly three-quarters chance that the Fed will cut its key interest rate as soon as September, according to CME Group data.
On Wall Street, Constellation Brands Inc. fell 3.3% after trading up and down during the day. The maker of Modello beer and Robert Mondavi wine reported better-than-expected profits for its latest quarter, but sales fell slightly below financial analysts' expectations.
Overall, the S&P 500 rose 28.01 points to 5,537.02, the Dow lost 23.85 points to 39,308.00 and the Nasdaq Composite added 159.54 points to 18,188.30.
This has traditionally been a strong time of year for Wall Street, according to Mark Hackett, head of investment research at Nationwide: The first two weeks of July were the best for the stock market since 1928, he said, and the S&P 500 has posted its ninth consecutive July gain.
Despite worrying reports showing lower-income U.S. households are still struggling to keep up with high inflation, “investor optimism continues to drive the market higher,” Hackett said.
Overseas stock indexes rose in many European and Asian countries. France's CAC 40 index rose 1.2%, reversing losses caused by concerns that a shift away from centrist government policies would lead to higher French government debt.
Ahead of the UK general election, London's FTSE 100 index rose 0.6 percent and Tokyo's Nikkei average rose 1.3 percent.
AP Business Writers Yuri Kageyama and Matt Ott contributed.