S&P 500 gains on Fed rate cut expectations, offsetting Microsoft slip

NEW YORK: Wall Street’s benchmark S&P 500 edged higher in choppy trading on Wednesday, as a set of economic data bolstered expectations for an interest rate cut by the Federal Reserve, while a slide in Microsoft’s shares kept a lid on gains.

Microsoft fell as much as 3 percent after a report said the tech giant has cut AI software sales quotas after many sales staff missed their targets in the fiscal year that ended in June.

The shares cut initial losses and were last down 1.8 percent after CNBC said the company denied the report.

The broader tech sector was down 0.4 percent, the biggest decliner on the S&P 500, and chip companies such as Nvidia slipped 0.3 percent, while Broadcom lost 1.6 percent.

“Anything that puts a dent in the image of Microsoft and its leadership position in AI certainly is going to have an impact,” said Art Hogan, chief market strategist at B. Riley Wealth.

Most of the other 10 S&P 500 sectors traded higher, with energy up 1.6 percent on higher crude prices.

Meanwhile, US services activity held steady in November, a survey showed. For investors, the focus was on prices paid by services firms, which eased only slightly from the previous month ahead of Friday’s personal consumption expenditures report, the Fed’s preferred inflation gauge. Separately, the ADP National Employment Report showed US private payrolls unexpectedly declined in November. With official employment reports for October and November due only after next week’s decision, traders are leaning more than usual on private-sector data.

Traders’ expectations for a 25-basis-point cut at next week’s Fed meeting rose to 89 percent after the data, up from around 87 percent earlier in the day, CME’s FedWatch Tool showed.

Investors weighed a report that the Trump administration has abruptly canceled interviews with finalists for the Fed chair role, which firmed up the view that Kevin Hassett - seen as a US interest rate cutter - will replace Jerome Powell next May.

At 11:33 a.m. ET, the Dow Jones Industrial Average rose 254.03 points, or 0.54 percent, to 47,728.49, the S&P 500 gained 15.11 points, or 0.22 percent, to 6,844.54 and the Nasdaq Composite gained 20.23 points, or 0.09 percent, to 23,434.06.

Rate cut expectations also lifted small caps, with the Russell 2000 index gaining 1.2 percent, following last week’s 5.5 percent surge - its strongest weekly performance in more than a year.

“We expect small caps to outperform in 2026, with earnings to drive returns,” said Jill Carey Hall, equity and quant strategist at BofA Securities, adding that Fed rate cuts and a strong capex cycle would be strong drivers.

On Wednesday, Marvell Technology jumped 4.5 percent after the chipmaker said it will buy semiconductor startup Celestial AI in a deal worth USD3.25 billion.

Microchip Technology rose 8.3 percent after the chipmaker raised its expectations for third-quarter results.

Advancing issues outnumbered decliners by a 2.15-to-1 ratio on the NYSE, and by a 2.01-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and one new low, while the Nasdaq Composite recorded 63 new highs and 80 new lows.