Wall Street stocks closed mixed on Tuesday as Federal Reserve Chairman Jerome Powell’s comments before Congress did little to change market expectations for the timing of a Fed interest rate cut.
The S&P 500 and the Nasdaq composite each rose 0.1%, enough to lift the indexes to all-time highs for the second time this week.
The Dow Jones Industrial Average fell 0.1% after spending most of the day drifting between small gains and losses.
In his testimony Tuesday before the Senate Banking Committee, Powell repeated this inflation has moderated especially in the last two years, although it remains above the central bank’s 2% target. He also noted that there is a risk that the Fed will move to cut interest rates too late or too little, warning that either scenario could end up weakening the economy and labor market.
Powell’s testimony offered little new guidance on the Fed’s plans for when it might cut interest rates. Traders are still betting there is a 70% chance the central bank will cut its key interest rate in September, according to data from CME Group.
“The market is really seeing no surprises today and that allows it to go modestly higher,” said Lisa Erickson, head of public markets at US Bank Wealth Management.
Treasury yields rose slightly in the bond market. The yield on the 10-year Treasury note rose to 4.30% from 4.28% late Monday.
The Fed has remained cautious about making a move on interest rates, keeping its key interest rate at its highest level in more than two decades as it waits cautiously for more signals that inflation is still cooling. .
While prices have fallen sharply over the past two years after the Fed raised interest rates, the central bank’s goal is to invite inflation back to its 2% target without slowing economic growth too much.
Most measures of inflation show it easing, albeit at a much slower pace through 2024. The rate is hovering around 3% and continues to put pressure on consumers, especially those on lower incomes.
In his testimony on Tuesday, Powell noted that “elevated inflation is not the only risk we face.” Cutting rates “too late or too little could unfairly weaken economic activity and employment,” he said.
A strong labor market and consumer spending have supported economic growth, although the pace has slowed. Consumer spending has also weakened as inflation prompts a shift in priorities for many people toward necessities over discretionary items. Borrowing costs are also higher due to high interest rates, adding more pressure on consumers.
Wall Street is hoping for rate cuts this year that could ease pressure on both consumers and investors. Most experts expect a rate cut by the Fed this year, but not until September. The Fed holds its next policy meeting later this month.
“If the Fed can’t start cutting rates in the next couple of months, the economy would be at risk of weakening further in the short term, and that would also push back when we would expect the economy to pick up again,” it said. Dave Sekera, chief US market strategist at Morningstar.
Gains in banks helped offset a pullback in industrials, energy and other sectors in the S&P 500 on Tuesday. JPMorgan Chase rose 1.2% and Bank of America added 2%.
Chipmaker Intel rose another 1.8% after Monday’s 6.2% gain as bullish analysts suggested the company’s upcoming processors will be in high demand for AI-related products.
Consumer goods company Helen of Troy, which makes Osprey and OXO products, sank 27.7% after posting first-quarter results that fell well short of forecasts.
Stocks have steadily gained ground over the past several months, and that has helped push the S&P 500 to 36 records so far this year.
Still, the S&P 500 rose 4.13 points to 5,576.98. The Nasdaq added 25.55 points to close at 18,429.29. The Dow fell 52.82 points to 39,291.97.
Powell is scheduled to testify Wednesday before the House Financial Services Committee. His testimony comes ahead of fresh inflation updates later this week.
Wall Street expects the latest government report on Thursday to show consumer prices fell to 3.1% in June from 3.3% in May. A report on wholesale inflation is expected on Friday, before costs are passed on to consumers.
Traders are also awaiting several earnings reports this week. Delta Air Lines will report its results on Thursday.
JPMorgan, Citigroup and Wells Fargo will report results on Friday. These updates can provide more information on consumer debt levels and whether banks are concerned about potential payments and delinquencies.
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AP Economics writer Christopher Rugaber contributed to this report.