by Echo Wang
(Reuters) – U.S. stock exchanges and the Nasdaq closed at record highs on Tuesday as Nvidia (NASDAQ:) surged to a new peak, while the Dow was little changed in pre-holiday trading after weaker-than-expected U.S. retail sales data.
Nvidia surpassed Microsoft (NASDAQ:) to become the world's most valuable company.
Other chip stocks, including Qualcomm (NASDAQ:), Hand Holdings (NASDAQ:) and Micron (NASDAQ:) also continued their recent rally, pushing the stocks to record highs.
“This is really the AI story,” said Tye Draper, a financial adviser at Beacon Capital Management in Franklin, Tennessee.
The Nasdaq closed at a record high for the seventh consecutive time, with gains in several chip stocks despite losses in Alphabet (NASDAQ:), Amazon (NASDAQ:) and Meta Platforms (NASDAQ:).
Retail sales rose 0.1% in May, while economists polled by Reuters had forecast a 0.3% rise, while another report showed industrial production and manufacturing output surprisingly strong in May.
Following the news, markets slightly raised bets on the Federal Reserve cutting interest rates twice this year, compared with recent forecasts by US central bankers for just one reduction, LSEG's FedWatch showed.
The technology sector gained the most in the S&P 500, while communication services declined.
Investors were focused on comments from Fed officials on Tuesday. New York Fed President John Williams said rates would gradually come down over time, while the Richmond Fed's Thomas Barkin said he needed a few more months of economic data before he could support a rate cut.
Some market observers said there were no surprises. “That's why markets were unchanged today,” said Jim Awad, senior managing director at Clearstead Advisors LLC in New York.
US markets will be closed on Wednesday for the Juneteenth holiday.
Expectations of interest rate cuts multiple times this year, enthusiasm for AI-related companies and strong earnings from other technology firms have driven equities higher in recent months, with gains concentrated in a few heavyweight stocks.
Citigroup raised its year-end target for the S&P 500 to 5,600 from 5,100.
According to preliminary data, the S&P 500 rose 14.23 points, or 0.25%, to close at 5,487.46, while the Nasdaq Composite added 9.09 points, or 0.05%, to close at 17,862.23. The Dow Jones Industrial Average rose 54.07 points, or 0.15%, to close at 38,832.17.
Shares of education technology provider Chegg (NYSE:) rose after it announced job cuts in a restructuring.
home builder Lennar (NYSE:) declined after it forecast lower-than-expected home deliveries in the third quarter.