Stock Market Today: Wall Street Swings After Powell’s Congressional Testimony

Wall Street stocks closed mixed on Tuesday after Federal Reserve Chairman Jerome Powell’s remarks to Congress did little to change market expectations about the timing of an interest rate cut by the Fed.

The S&P 500 and Nasdaq Composite each rose 0.1%, enough to push the indexes to record highs for the second time this week.

The Dow Jones Industrial Average fell 0.1% after spending most of the day swinging between small gains and losses.

In his testimony Tuesday before the Senate Banking Committee, Powell stressed that Inflation has declined. He noted that U.S. inflation has risen significantly over the past two years, though it remains above the central bank’s 2% target. He also noted that there is a risk that the Fed will cut interest rates too late or too little, warning that either scenario could ultimately weaken the economy and the labor market.

Powell’s testimony offered little new guidance on the Fed’s plans for when to cut interest rates. Traders are still betting there is a 70% chance the central bank will cut its benchmark rate in September, according to data from CME Group.

“The market is not seeing any surprises today, which allows it to move modestly higher,” said Lisa Erickson, head of public markets at U.S. Bank Wealth Management.

U.S. Treasury yields rose slightly in the bond market. The yield on the 10-year U.S. Treasury note rose to 4.30% from 4.28% late Monday.

The Federal Reserve remained cautious on moving interest rates, keeping its benchmark interest rate at its highest level in more than two decades, while cautiously awaiting further signs that inflation is still cooling.

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Although prices have fallen sharply over the past two years as the Federal Reserve has raised interest rates, the central bank’s goal is to bring inflation down to its 2% target without slowing economic growth too much.

Most measures of inflation point to it declining, 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 “high inflation is not the only risk we face.” He said that cutting interest rates “too late or too little could unduly weaken economic activity and employment.”

A strong labor market and consumer spending have supported economic growth, though the pace of growth has slowed. Consumer spending has weakened as inflation has led many people to shift their priorities toward necessities rather than discretionary goods. Borrowing costs have also risen due to higher interest rates, adding to the pressure on consumers.

Wall Street is hoping for a rate cut this year, which could ease some of the pressure on consumers and investors. Most experts expect the Federal Reserve to cut rates this year, but not before 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 is at risk of weakening further in the near term, and that would also push us back when we expect the economy to accelerate again,” said Dave Sequeira, chief U.S. market strategist at Morningstar.

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Gains in bank stocks helped offset a decline in industrials, energy and other sectors in the S&P 500 on Tuesday. JPMorgan Chase rose 1.2%, while Bank of America added 2%.

Chipmaker Intel rose another 1.8% after gaining 6.2% on Monday as bullish analysts suggested the company’s next processors would be in high demand for products related to artificial intelligence.

Shares of consumer goods company Helen of Troy, which makes Osprey and Oxo products, fell 27.7% after reporting first-quarter results that fell far short of expectations.

Stocks have been posting steady gains over the past few months, helping push the S&P 500 to a record 36 highs so far this year.

The S&P 500 rose 4.13 points to close at 5,576.98. The Nasdaq Composite added 25.55 points to close at 18,429.29. The Dow Jones Industrial Average fell 52.82 points to close at 39,291.97.

Powell is scheduled to testify Wednesday before the House Financial Services Committee. His testimony comes ahead of new 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, before costs are passed on to consumers, is due on Friday.

Traders are also looking ahead to several earnings reports this week. Delta Air Lines is scheduled to report results on Thursday.

JPMorgan, Citigroup and Wells Fargo are scheduled to report earnings on Friday. Those updates could provide more insight into consumer debt levels and whether banks are worried about payments and potential defaults.

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Associated Press economics writer Christopher Rugabier contributed to this report.

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