By Shashwat Chauhan and Bansari Mayur Kamdar
(Reuters) -Wall Street's main indexes struggled for direction on Thursday in lean trading ahead of Easter break, while investors awaited data to gauge the Federal Reserve's policy path on the last business day of a strong first quarter.
The three main U.S. indexes were set for robust quarterly gains, with the S&P 500 on track for its best first quarter performance since 2019, as an AI-fueled rally and optimism around the timing of the Fed's rate cuts helped lift Wall Street to record highs this month.
At current levels, the blue-chip Dow is less than 1% away from the 40,000-mark, a level it has never breached.
Meanwhile, data on Thursday showed the U.S. economy grew faster than previously estimated in the fourth quarter, while a separate report showed initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 210,000 for the week ended March 23.
"We ultimately anticipate a slower pace of economic growth this year as the labor market moderates and dents purchasing power, as households have become increasingly dependent on income," said economists at Wells Fargo (NYSE:WFC).
"But elevated margins, a still-decent cash position for many firms and the likelihood of falling borrowing costs in the second half of the year will likely support capital expenditures and firms' profitability generally."
Heading into the long weekend, focus will also be on the Personal Consumption Expenditures Price Index (PCE), the Fed's preferred inflation gauge, which is due on Good Friday, when the U.S. stock market will be shut.
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.
Traders see a 64% chance the Fed will begin its easing cycle in June, according to the CME FedWatch tool.
At 11:21 a.m. ET, the Dow Jones Industrial Average was down 8.46 points, or 0.02%, at 39,751.62, the S&P 500 was up 5.65 points, or 0.11%, at 5,254.14, and the Nasdaq Composite was down 1.01 points, or 0.01%, at 16,398.51.
Three of the 11 major S&P 500 sectors declined, with communication services slipping. The rate-sensitive sector has been the best performer so far this quarter, along with technology stocks
Keeping gains in check on the tech-heavy Nasdaq, most megacap growth stocks slipped, with Tesla (NASDAQ:TSLA) leading losses, down 1.7%.
The Philadelphia Semiconductor Index inched 0.3% up and was on track to end its second straight quarter of double-digit gains, up over 17% so far.
Cryptocurrency and blockchain-related companies advanced as bitcoin recovered after a two-day slide. Exchange operator Coinbase (NASDAQ:COIN) Global, blockchain farm operator Bitfarms and crypto miner Riot Platforms (NASDAQ:RIOT) rose between 2.9% and 7.6%.
Estee Lauder (NYSE:EL) jumped 5.5% after BofA Global Research upgraded the cosmetics giant's rating to "buy" from "neutral".
Advancing issues outnumbered decliners by a 2.74-to-1 ratio on the NYSE and by a 1.89-to-1 ratio on the Nasdaq.
The S&P index recorded 81 new 52-week highs and no new lows, while the Nasdaq recorded 113 new highs and 28 new lows.