Nasdaq jumps on megacap gains as softening inflation fans rate cut hopes

The report strengthened rate cut bets, with money markets pricing in a 66% chance of at least a 25 basis point cut in June, compared with 55% a day before the data was released, according to the CME Group's FedWatch tool.

Fed Chair Jerome Powell said on Friday that the latest U.S. inflation data was "along the lines of what we would like to see" - comments that appeared to keep the central bank's baseline for interest rate cuts this year intact.

Most megacap growth stocks - whose cash flows are typically discounted in a higher interest rate regime - gained, with Microsoft, Nvidia, Alphabet and Amazon.com up between 0.8% - 2.6%.

Market participants, however, expect the central bank to stand pat on rates at the upcoming policy meeting in May.

"There hasn't been a whole lot of movement around those three (expected cuts). The market keeps waiting for data, keeps waiting for the Fed to say things, but you're getting some degree of mixed messages," said Thomas Martin, senior portfolio manager at GLOBALT Investments.

"We're in the camp that they won't (cut) in June, but that they will probably do three (sometimes) this year."

The gains on Wall Street have been powered by optimism around artificial intelligence, robust earnings and hopes of a soft landing - where inflation moderates without causing an economic slowdown.

The benchmark S&P 500 advanced over 10% in the first three months of the year, its biggest gain since 2019. At current levels, the blue-chip Dow sits less than 1% away from breaching the 40,000 level for the first time.

The yield on the 10-year benchmark U.S. Treasury note , however, rose to 4.3032%, touching its highest level in a week and keeping gains in check.

On the data front, the S&P Global's final manufacturing PMI report for March came in at 51.9, while the ISM manufacturing March PMI came in at 50.3 against expectations of 48.5.

At 10:02 a.m. ET, the Industrial Average was down 152.37 points, or 0.38%, at 39,655.00, the S&P 500 was up 5.74 points, or 0.11%, at 5,260.09, and the Nasdaq Composite was up 94.21 points, or 0.58%, at 16,473.67.

Nine of the 11 major S&P 500 sectors were trading lower, with utilities leading losses, down 1.0%, while communication services jumped 1.4%.

The Philadelphia Semiconductor Index gained 2.4%, with chipmakers like Micron Technology, and Marvell Technology rising 7.0% and 3.7%, respectively.

AT&T fell 1.7% after the wireless carrier said it was investigating a data leak that could have impacted nearly 73 million current and former accounts.

Declining issues outnumbered advancers for a 1.42-to-1 ratio on the NYSE and for a 1.33-to-1 ratio on the Nasdaq.

The S&P index recorded 25 new 52-week highs and one new low, while the Nasdaq recorded 62 new highs and 21 new lows.