By Stephen Culp
NEW YORK (Reuters) -Wall Street resumed its advance on Thursday, pushing the S&P 500 and the Nasdaq closer to record closing highs as the Israel-Iran cease-fire continued to hold and a raft of economic indicators appeared to support the case for the U.S. Federal Reserve lowering borrowing costs this year.
A broad rally pushed all three major U.S. stock indexes higher, placing them on track for weekly gains.
The S&P 500 and the Nasdaq are now within striking distance of all-time closing highs, while the Nasdaq 100, a subset of the Nasdaq Composite, notched its second consecutive record closing high on Wednesday.
“Aside from some broad momentum and some key technical levels, the market is buoyed by some of the economic data this morning,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
Bank stocks outperformed after the Fed unveiled a proposal to relax its leverage rules, which would ease the capital big banks are required to hold against relatively low-risk assets.
The S&P 500 banks index advanced 1.7%.
“This administration came in promising deregulation,” Mayfield added. “And this is not just an example of that, but kind of a signpost that there could be more to come.”
Richmond Fed President Thomas Barkin cautioned against taking options off the table amid ongoing economic uncertainty, but added that he did not expect tariffs to be “as inflationary as a lot of people worry about.”
A muted tariff effect could help make the case for a rate cut this fall, according to San Francisco Fed President Mary Daly. Boston Fed President Susan Collins said on Wednesday she’s leaning toward a rate cut later this year amid an uncertain economic outlook.
These remarks follow Fed Chair Jerome Powell’s two-day congressional testimony, at which he reiterated the central bank’s wait-and-see policy stance with respect to rate cuts and economic tariff effects.
Financial markets are currently pricing in a more than 22% likelihood of a 25 basis point reduction the Fed Funds target rate at the July Fed meeting, and almost a 73% probability that this year’s first rate cut will come in September, according to CME’s FedWatch tool.
“Between now and the July meeting, we have the July 9th end of the 90-day reciprocal tariff pause,” Mayfield said. “So to the extent that the Fed is primarily worried about tariff inflation, they will get a lot more information on July 9th.”
Last week the Fed released its updated Summary of Economic Projections, which showed policymakers anticipate cutting the key policy rate by about half a percentage point by year-end.
