NEW YORK, March 28 (Reuters) - U.S. stocks held near the unchanged mark on Thursday, with the S&P 500 poised to notch its best first quarter performance since 2019, as investors digested the latest batch of economic data while looking towards then next inflation reading.
Each of the three main U.S. indexes were set for solid quarterly gains, led by a climb of more than 10% for the S&P 500, aided by as optimism over artificial intelligence (AI) related stocks and expectations the U.S. Federal Reserve will begin to cut interest rates this year.
The blue-chip Dow (.DJI), opens new tab sat less than 1% away from breaching the 40,000 level for the first time.
Data on Thursday showed the U.S. economy grew faster than previously estimated in the fourth quarter, partly due to strong consumer spending, while a separate report showed initial jobless claims indicated the labor market remains on solid footing.
While U.S. equity markets will be closed for the Good Friday holiday, the focus will be on the release of the Personal Consumption Expenditures Price Index (PCE), the Fed's preferred inflation gauge, for clues on the timing and size of rate cuts this year from the central bank.
"Without a growth contraction it's going to be difficult for the Fed to reach its 2% target this year so volatility around that repricing is likely to tick higher," said Dylan Kremer, chief investment officer at Certuity in Miami.
"But as long as the economic activity remains robust and labor markets remain robust the US consumer will remain active and continue to buoy demand which should continue to support prices."
The Dow Jones Industrial Average (.DJI), opens new tab rose 21.66 points, or 0.06%, to 39,781.74, the S&P 500 (.SPX), opens new tab gained 4.51 points, or 0.09%, to 5,253.00 and the Nasdaq Composite (.IXIC), opens new tab lost 22.14 points, or 0.13%, to 16,377.29.
Overnight, Fed Governor Christopher Waller said recent disappointing inflation data affirms the case for the central bank to hold off on cutting its short-term interest rate target, but did not rule out trimming rates later in the year.
Markets are pricing in a roughly 64% chance the Fed will cut rates by at least 25 basis points (bps) in June, according to CME's FedWatch Tool, opens new tab.
While the communication services (.SPLRCL), opens new tab and tech (.SPLRCT), opens new tab are the best performing of the 11 major sectors this quarter, only real estate (.SPLRCR), opens new tab is on pace to record a decline.
Walgreens Boots (WBA.O), opens new tab shares rose 3.64% after its quarterly earnings in which it recorded an impairment charge on its investment in clinic operator VillageMD.
Home Depot (HD.N), opens new tab slipped 0.57% after the home improvement retailer said it would buy building materials supplier SRS Distribution in an $18.25 billion deal in its largest acquisition.
Estee Lauder (EL.N), opens new tab jumped 6.52% after BofA Global Research upgraded the cosmetics giant's rating to "buy" from "neutral".
Advancing issues outnumbered decliners by a 1.99-to-1 ratio on the NYSE and by a 1.5-to-1 ratio on the Nasdaq.
The S&P 500 posted 84 new 52-week highs and no new lows while the Nasdaq recorded 250 new highs and 45 new lows.
Reporting by Chuck Mikolajczak; Editing by Aurora Ellis
