On Tuesday, the benchmark S&P 500and tech-heavyNasdaq Compositeboth registered fresh record high closes, boosted by a surge in Nvidia (NASDAQ:NVDA) shares that pushed the market capitalization of the artificial intelligence chipmaker above software group Microsoft (NASDAQ:MSFT) to become the world's most valuable company.

Also aiding sentiment was softer-than-anticipated U.S. retail sales data for May, which pointed to slackening momentum in consumer spending. Traders subsequently bolstered bets that the Federal Reserve will roll out two interest rate cuts this year despite the central bank recently signaling it only expects one.

In a note to clients on Wednesday, the analysts argued the retail sales numbers were the latest sign the U.S. economy is on course for a so-called "soft landing," a scenario in which elevated inflation is cooled without causing a broader meltdown in activity.

"These figures are consistent with the gradual deceleration that is taking place in domestic demand and should contribute to the disinflation process," they wrote. "In our view, while the U.S. economy is slowing, we don’t see evidence that suggests a hard landing. This means the outlook for equities is positive, supported by resilient growth and solid earnings."

Market pricing for two rate cuts in 2024, meanwhile, indicates a potential easing cycle from the Fed in the months ahead that could "provide a tailwind for both growth and small-cap stocks," the UBS analysts said.