May 7 (Reuters) - The S&P 500 and Dow Jones Industrial Average both clung onto gains to close higher on Tuesday, extending recent winning streaks fueled by renewed expectations that the Federal Reserve will cut interest rates this year.
The advances pushed the S&P 500 (.SPX), opens new tab to a fourth straight higher close, and its best winning run since March. For the Dow (.DJI), opens new tab, it is now on its longest positive run since December 2023, gaining for the fifth session in a row.
The benchmark performances came despite Walt Disney (DIS.N), opens new tab slumping as a surprise profit in its streaming entertainment division was eclipsed by a drop in its traditional TV business and weaker box office.
Despite Disney's drag, for much of the day the three main U.S. stock indexes had traded at their highest intraday levels in more than three weeks, extending gains after a weaker-than-expected labor market report last week fueled bets that the U.S. central bank will cut rates.
"I think the market is in this little holding pattern until the big data comes next week," said Garrett Melson, portfolio strategist at Natixis Investment Manager Solutions, referring to the Producer Price Index (PPI) due on May 14, and the Consumer Price Index (CPI) scheduled for May 15.
Generally, the Fed and policymakers have been consistent in their message in recent weeks that rate cuts will come but the central bank is going to be cautious in implementing them. That message was repeated on Monday by Federal Reserve Bank of New York President John Williams and Richmond Federal Reserve President Thomas Barkin.
This meant, on a day lacking major data announcements, markets shrugged off comments from Minneapolis Federal Reserve President Neel Kashkari that the Fed may need to hold rates steady for the remainder of the year due to stalled inflation and housing market strength.
Overall, Friday's payrolls data and better-than-expected earnings reports have helped soothe investor jitters around sticky inflation and a robust economy that have kept the rates elevated.
Traders are anticipating rate cuts of 46 basis points (bps) from the Fed by the end of 2024, according to LSEG's interest rate probabilities app, with the first pivot to rate cut seen in September and another in December. They were expecting only one cut before the labor report last week.
"The market is far more hypersensitive to the data than the Fed is," said Natixis' Melson, adding that "the bar for the Fed to abandon the easing bias is extremely high."
According to preliminary data, the S&P 500 (.SPX), opens new tab gained 6.75 points, or 0.13%, to end at 5,187.49 points, while the Nasdaq Composite (.IXIC), opens new tab lost 16.69 points, or 0.10%, to 16,332.56. The Dow Jones Industrial Average (.DJI), opens new tab rose 26.18 points, or 0.07%, to 38,878.45.
Megacap stocks Alphabet (GOOGL.O), opens new tab and Meta Platforms (META.O), opens new tab rose, boosting the main indexes.
Nvidia (NVDA.O), opens new tab fell after the Wall Street Journal reported that Apple (AAPL.O), opens new tab was developing its own chip to run artificial intelligence (AI) software in data centers.
Apple gained as it introduced a new chip called the M4, but put the new chip in an iPad Pro model rather than a laptop.
Tesla (TSLA.O), opens new tab fell after data showed the U.S. automaker sold 62,167 China-made electric vehicles in April, down 18% from a year earlier.
Palantir Technologies (PLTR.N), opens new tab tumbled after the data analytics firm's annual revenue forecast fell short of analysts' estimates.
Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru and David French in New York; Editing by Shinjini Ganguli and Aurora Ellis
