Nasdaq hits fresh record high on soft producer inflation data, chip strength

AI chip leader Nvidia rose 3.3%, pushing the Philadelphia SE Semiconductor Index 1.5% higher to an all-time peak.

A Labor Department report showed the U.S. producer price index (PPI) unexpectedly fell 0.2% month-on-month in May, compared with a 0.1% increase expected by economists polled by Reuters.

Separately, the number of Americans filing new claims for unemployment benefits increased to a 10-month high last week.

Markets lifted bets on a September start to rate cuts to nearly 68% from 60% before the data, according to the CME's FedWatch tool. That was despite policymakers projecting only one rate cut this year.

Investor sentiment was also supported by softer-than-expected U.S. consumer inflation data on Wednesday and Fed Chairman Jerome Powell's acknowledgement that progress had been made in tackling price pressures.

"PPI was a good number ... it speaks to the Fed's comments that inflation has shown signs of moderating, but they still need to see more signs of moderation in inflation," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

"But we're moving in the right direction and it speaks to the potential for a rate cut of most likely in September."

UBS Global Research said it now expects the Fed to cut interest rates in December instead of September, while Goldman Sachs and Morgan Stanley continue to expect the first cut in September.

Also on tap, New York Fed President John Williams will moderate a panel later in the day.

Benchmark Treasury yields extended losses from the previous session, helping lift stocks further.

At 9:46 a.m. ET, the Industrial Average was down 215.20 points, or 0.56%, at 38,497.01, the S&P 500 was up 10.28 points, or 0.19%, at 5,431.31, and the Nasdaq Composite was up 127.58 points, or 0.72%, at 17,736.02.

The technology sector led sectoral gains with a 1.6% rise, while the energy sector was among the biggest decliners.

Amid the optimism, questions remained over whether the economy was slowing too quickly, with the blue-chip Dow slipping and an index of economically sensitive small-cap stocks falling 0.4%

Tesla leapt 5.9% after Elon Musk said company shareholders were voting to approve his $56 billion pay package and to move the electric-vehicle maker's legal home to Texas.

Apple gained 1.5%, trading at all-time-highs after overtaking Microsoft as the world's most valuable company earlier in the week.

Virgin Galactic plunged 8.4%, a day after announcing a 1-for-20 reverse stock split.

Declining issues outnumbered advancers for a 1.49-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.30-to-1 ratio on the Nasdaq.

The S&P index recorded 7 new 52-week highs and 5 new lows, while the Nasdaq recorded 29 new highs and 35 new lows.