US stock market: Stocks close with gains, led by Dow as investors look for rate insight

US stock market: US stocks were higher on Wednesday, with the Dow leading gains and the S&P 500 setting a closing record, paced drugmaker Merck, while investors looked towards the next piece of inflation data and Federal Reserve commentary for signals on the rate path. Merck & Co (MRK.N) advanced 4.96 per cent as the best performer on the Dow after the US Food and Drug Administration approved its therapy for adults suffering from a rare lung condition.

The blue-chip Dow now sits less than 1 per cent away from breaking the 40,000 level for the first time. Gains on the tech-heavy Nasdaq were held in check, however, by 2.5 per cent decline in AI giant Nvidia (NVDA.O), which lost ground for a second straight session. Shares were still up more than 80 per cent on the year, however.

Recent data that showed hotter than expected inflation in the form of consumer prices (CPI) and producer prices (PPI) failed to markedly disrupt market expectations for a rate cut of at least 25 basis points (bps) from the Federal Reserve in June.

The Fed kept its projections for three rate cuts this year intact at its policy meeting last week, which central bank officials have largely stood by this week in comments. The Personal Consumption Expenditures Price Index (PCE), the Fed's preferred inflation gauge, is due on Good Friday, when the US stock market will be closed. "The Fed can and should take its time, largely because the economy is affording them that flexibility with the strength that we're seeing, and that premature rate cuts only probably set us up for a more adverse outcome," said Craig Fehr, head of investment strategy at Edward Jones in St. Louis.

"The real challenge for Fed officials has been massaging and guiding market expectations when they swing too far in one direction or another." Later in the day, Fed Board Governor Christopher Waller is expected to speak at the Economic Club of New York later in the day.

The Dow Jones Industrial Average (.DJI) rose 477.75 points, or 1.22 per cent , to 39,760.08, the S&P 500 (.SPX) gained 44.91 points, or 0.86 per cent, to 5,248.49 and the Nasdaq Composite (.IXIC) gained 83.82 points, or 0.51 per cent, to 16,399.52.

The gains marked the biggest daily percentage advance for the Dow since Dec. 13. All three major US stock indexes were poised for quarterly gains, with the S&P on track for its biggest first quarter percentage gain since 2019. Traders see a 70.4 per cent chance the Fed will begin its easing cycle in June, according to the CME FedWatch Tool.

Each of the 11 major S&P sectors were higher, with rate sensitive utilities (.SPLRCU) and real estate (.SPLRCR) were the best performers, climbing 2.75 per cent and 2.42 per cent, respectively, getting a lift as bond yields eased.

Among individual stocks, Trump Media & Technology Group (DJT.O) jumped 14.19 per cent a day after its stellar Nasdaq debut. On the down side, GameStop (GME.N), plunged 15.03 per cent after the videogame retailer reported lower fourth-quarter revenue and said it had cut an unspecified number of jobs to reduce costs.

Advancing issues outnumbered decliners by a 4.5-to-1 ratio on the NYSE. On the Nasdaq, advancing issues outnumbered decliners by a 2.68-to-1 ratio. The S&P 500 posted 62 new 52-week highs and no new lows while the Nasdaq recorded 184 new highs and 79 new lows.

Volume on US exchanges was 10.65 billion shares, compared with the 12.2 billion average for the full session over the last 20 trading days. Activity is expected to lighten ahead of the Friday holiday.