FX.co ★ From Record to Bust: How Chips and the Economy Shaped the S&P 500

The S&P 500 and Nasdaq ended lower Thursday as market leader Nvidia shares pulled back from earlier gains. Investors were poring over fresh economic data and Federal Reserve statements to see when interest rates might be cut this year.

Earlier, the S&P 500 hit 5,500 for the first time in history, in line with many brokerage firms' year-end forecasts. The Nasdaq ended a seven-day run of record closing highs.

Stocks on Wall Street retreated from early record highs despite gains in overseas benchmarks. U.S. Treasury yields rose on weak economic data and expectations of more bond issuance next week.

The dollar gained ground as U.S. yields rose, widening the gap with non-dollar rates that have been trending lower. It reached 160 yen, prompting Tokyo to intervene in late April to support its currency.

The Dow Jones Industrial Average was the only major index to hold on to gains. The S&P 500 (.SPX) and Nasdaq (.IXIC) extended a streak of intraday record highs before falling, with the Nasdaq ending a seven-session run of record highs at the close.

Disappointing housing starts and building permits data, as well as a report on jobless claims, suggest a gradual cooling in the labor market, confirming that the Fed's restrictive policies are having the intended effect.

"Weaker-than-expected economic data suggests that high and long-term interest rates are achieving the Fed's goals," said Greg Bassuk, CEO of AXS Investments in New York. "These signs of a slight slowdown in the economy will be welcomed by the Fed as they consider lowering interest rates."

That, coupled with the dovish sentiment expressed by the Bank of England, which has held off on easing ahead of the upcoming U.K. general election, and the Swiss National Bank's rate cut, has created room for the Fed to maneuver on the timing of its rate cuts.

Wall Street's rally was fueled by enthusiasm for artificial intelligence, led by chipmaker Nvidia (NVDA.O), which recently became the world's most valuable company by market capitalization. However, despite the morning gains, Nvidia shares fell about 2%.

Nvidia shares fell 3.54% after the morning gains. The chipmaker overtook Microsoft to become the world's most valuable public company on Tuesday.

Dell (DELL.N) and Super Micro Computer (SMCI.O) shares also fell 0.42% and 0.26%, respectively, after initially rallying on news that Elon Musk's AI startup had won server orders.

The number of Americans filing new jobless claims fell last week, but the latest data showed the total number of people receiving benefits reached its highest level since January, suggesting the U.S. labor market is continuing to cool.

Separately, data showed that U.S. single-family home starts fell in May, reflecting continued high mortgage rates.

The energy (.SPNY) and utilities (.SPLRCU) sectors were the biggest gainers among the 11 S&P 500 sector indexes, rising 1.86% and 0.89%, respectively, while the technology sector (.SPLRCT) led the declines.

Minneapolis Fed President Neel Kashkari said it would take a year or two for inflation to return to 2% as wage growth remains high, raising concerns that interest rates will remain elevated for a long time.

Money markets are pricing in a 58% chance of the U.S. central bank cutting rates by 25 basis points in September, according to LSEG FedWatch.

The Dow Jones Industrial Average (.DJI) rose 299.90 points, or 0.77%, to 39,134.76. The S&P 500 (.SPX) lost 13.86 points, or 0.25%, to 5,473.17 and the Nasdaq Composite (.IXIC) fell 140.64 points, or 0.79%, to 17,721.59.

Kroger (KR.N) shares fell 3.27% after the company expressed caution about near-term consumer spending while reiterating its full-year sales and profit forecasts despite beating first-quarter estimates.

Trump Media & Technology Group (DJT.O) shares fell 14.56%, weighed down by potential dilution after the U.S. Securities and Exchange Commission approved the company's application to resell certain shares and warrants, netting it about $247 million in proceeds.

European stocks were strengthened by the technology and real estate sectors, as well as gains in Swiss stocks after the central bank continued to ease monetary policy.

The STOXX 600 (.STOXX) index rose 0.93%, while the broader European FTSEurofirst 300 (.FTEU3) index rose 0.90%.

The MSCI Worldwide Equity Index (.MIWD00000PUS) hit a record high but ended the day down 0.15% at 803.89.

Emerging market stocks lost 0.06%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) ended the day down 0.16%, while Japan's Nikkei (.N225) rose 0.16%.

U.S. Treasury yields initially fell after the economic data, then began to rise again.

The market is eagerly awaiting an auction next week that will offer about $183 billion in two-, five- and seven-year U.S. Treasuries. Investors often sell Treasuries ahead of auctions to boost their yields and then buy them back at a lower price, a practice known as concessioning.

The benchmark 10-year U.S. yield has risen 3.7 basis points since late Tuesday to 4.254%. The 30-year yield has risen 3.7 basis points to 4.3908%. The yield on the two-year note, which is typically correlated with interest rate expectations, rose 2.7 basis points to 4.7308%.

The dollar index, which tracks the greenback against a basket of currencies including the yen and euro, rose 0.4% to 105.63, while the euro fell 0.34% to end the day at $1.0703.

The dollar strengthened against the Japanese yen to its highest since April 29, up 0.51% to 158.89 yen.

The British pound fell to a five-week low against the dollar, down 0.43% to last trade at $1.2662.

"When we talk about dollar strength, it feels like for the first time in a long time there's a divergence in global monetary policy... Fed spokespeople continue to talk about the need for patience and time," said Art Hogan, chief market strategist at B Riley Wealth in New York.

"The dollar is standing out in a weak competitive environment, particularly in Japan, which is making things worse," Hogan added.

U.S. crude oil prices rose 0.74% to $82.17 a barrel, while Brent crude rose 0.75% to $85.71 a barrel.

Spot gold rose 1.36% to $2,359.22 an ounce. U.S. gold futures rose 1.01% to $2,354.00 an ounce. In cryptocurrencies, Bitcoin rose 0.27% to $65,029.00, while Ethereum fell 0.47% to $3,534.8.

Declining issues outnumbered advancing issues on the NYSE by 1.03 to 1, with 248 new highs and 118 new lows.

The S&P 500 posted 31 new 52-week highs and 6 new lows. The Nasdaq Composite posted 39 new highs and 217 new lows.

Trading volume on U.S. exchanges totaled 11.98 billion shares, below the 20-day average of 13.51 billion shares.