Stock Market Today: Wall Street Wobbles After Powell Testimony Before Congress

Wall Street stock indexes closed mixed on Tuesday after comments by Federal Reserve Chairman Jerome Powell in Congress did little to change market expectations about the timing of a Fed rate cut.

The S&P 500 and the 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 the index swung between small gains and losses for most of the day.

In his testimony Tuesday before the Senate Banking Committee, Powell reiterated that inflation has decreased particularly over the past two years, though it is still above the central bank’s 2% target. He also noted that there is a risk that the Fed cuts interest rates too late or too little, warning that either scenario could weaken 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’s a 70% chance the central bank will cut its key interest rate as early as September, according to data from CME Group.

“The market is not really seeing any surprises today and that is allowing prices to move slightly 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 slightly to 4.30% from 4.28% Monday night.

The Fed has remained cautious about taking steps to cut rates, keeping the key rate at its highest level in more than two decades as it cautiously awaits more signs that inflation is still cooling.

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

Most inflation figures show inflation declining, but at a much slower pace in 2024. The rate hovers around 3% and continues to put pressure on consumers, especially those on lower incomes.

In his testimony Tuesday, Powell noted that “high inflation is not the only risk we face.” Cutting interest rates “too late or too little could unnecessarily 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 causes many to shift priorities from necessities to discretionary items. Borrowing costs are also higher due to increased interest rates, putting more pressure on consumers.

Wall Street is hoping for rate cuts this year that could ease the pressure on both consumers and investors. Most experts expect one rate cut from the Fed this year, but not before September. The Fed will hold its next policy meeting later this month.

“If the Fed can’t cut rates in the coming months, the economy risks further weakening in the near term and would also delay the time when we expect the economy to pick up again,” said Dave Sekera, chief U.S. market strategist at Morningstar.

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

Chipmaker Intel rose 1.8% after Monday’s 6.2% gain, as analysts are bullish and believe the company’s next processors will be in high demand for AI-related products.

Consumer products company Helen of Troy, which makes Osprey and OXO products, fell 27.7% after first-quarter results fell well short of expectations.

Stock prices have risen steadily in recent months, helping the S&P 500 break 36 records so far this year.

All told, the S&P 500 rose 4.13 points to 5,576.98. The Nasdaq gained 25.55 points to close at 18,429.29. The Dow fell 52.82 points to 39,291.97.

Powell is scheduled to testify before the House Financial Services Committee on Wednesday, 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 Friday.

Traders are also looking ahead to several earnings reports this week, with Delta Air Lines set to report results on Thursday.

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

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AP economist Christopher Rugaber contributed to this report.

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