Wall Street Reacts To Powell’s Testimony With Mixed Results

Wall Street closed with mixed results on Tuesday following Federal Reserve Chair Jerome Powell’s testimony before Congress. Powell’s remarks provided little new insight into the Federal Reserve’s plans for future interest rate cuts, leaving investors uncertain.

The S&P 500 and Nasdaq composite both edged up by 0.1%, continuing their recent record highs. In contrast, the Dow Jones Industrial Average dropped by 52 points, or 0.1%. Among the notable market moves, consumer goods company Helen of Troy plunged nearly 28% after reporting disappointing first-quarter results.

In the bond market, Treasury yields saw a slight rise. The yield on the 10-year Treasury note increased to 4.29% from 4.28% on Monday. Gains in banking stocks helped balance a pullback in the tech sector, with JPMorgan Chase rising 1.6% and Bank of America gaining 2.3%, while Microsoft and Broadcom fell 1.6% and 1.5% respectively.

Intel continued its upward trajectory, climbing another 1.9% following a 6.2% rise on Monday, driven by positive analyst outlooks for its next-generation processors.

The market’s subdued reaction reflected the lack of clear guidance from Powell’s testimony on when the Federal Reserve might begin lowering its benchmark interest rate. Lisa Erickson, head of public markets at U.S. Bank Wealth Management, noted, “The market is really seeing no surprises today and so that’s allowing it to modestly drift higher.”

Powell reiterated the Fed’s cautious stance, maintaining the highest benchmark interest rate in over two decades as the central bank monitors inflation. Despite a significant reduction in inflation over the past two years, the rate still hovers around 3%, impacting consumers, particularly those with lower incomes.

Powell warned against premature rate cuts, stating that doing so “too late or too little could unduly weaken economic activity and employment.” He highlighted the balancing act between controlling inflation and sustaining economic growth.

While a robust jobs market and consumer spending have bolstered economic growth, the pace has slowed. Higher borrowing costs due to elevated interest rates have added pressure on consumers, who are prioritizing necessities over discretionary spending.

Wall Street hopes for rate cuts this year to relieve pressure on consumers and investors. Experts predict one rate cut from the Fed in September. Powell’s testimony will continue on Wednesday before the House Financial Services Committee, with new inflation updates expected later this week.

The latest government report, due Thursday, is anticipated to show a decrease in consumer prices to 3.1% in June from 3.3% in May. Additionally, a report on wholesale-level inflation is expected on Friday.

Investors are also looking ahead to several key earnings reports. Delta Air Lines will release its results on Thursday, followed by JPMorgan, Citigroup, and Wells Fargo on Friday, which could offer insights into consumer debt levels and potential banking concerns.

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