(Reuters) – The S&P 500 and Nasdaq closed at record highs on Tuesday, helped by gains in Nvidia shares, after Federal Reserve Chairman Jerome Powell told lawmakers that further “favorable” economic data would strengthen the case for cutting interest rates.
AI chipmaker Nvidia rose 2.5%, offsetting declines in other chip stocks.
Microsoft fell 1.4%, while Tesla rose 3.7%, giving it a 5% increase in 2024.
This marked the Nasdaq’s sixth consecutive day of record highs and the S&P 500’s fifth consecutive day of record highs, as optimism about the growth of AI across corporate America offset uncertainty about the path of the Fed’s interest rate cuts.
In his testimony before Congress, Chairman Powell said that while inflation remains “above” the Fed’s 2 percent soft-landing target, it has improved in recent months and “as we receive further, better data, the case for further rate cuts will strengthen.”
But the central bank governor insisted he was “not sending any signals about the timing of future action.”
Markets continue to price in 50 basis points of easing this year, seeing a nearly 72% chance of a 25 basis point cut at the Fed’s September meeting, up from less than 50% a month ago, according to CME FedWatch.
“The U.S. economy, and now the U.S. labor market, has been surprisingly resilient through 2024, and our base case does not call for a recession, but rather continued moderate growth for the rest of this year and into next,” said Bill Northey, senior investment director at U.S. Bank Wealth Management.
Inflation data is also due to be released this week, including the Consumer Price Index on Thursday and the Producer Price Index on Friday.
Shares of JPMorgan and Wells Fargo rose more than 1%, while Citi rose 2.8%. The three banks report quarterly results on Friday, kicking off the second-quarter earnings season.
Reuters reported that the Fed is considering rule changes that could save big banks billions of dollars in capital.
Analysts on average expect total earnings per share for S&P 500 companies to rise 10.1% in the second quarter, up from an 8.2% increase in the first quarter, according to LSEG I/B/E/S data.
The S&P 500 rose 0.07% to close at 5,576.98 points.
The Nasdaq rose 0.14% to 18,429.29 points, while the Dow Jones Industrial Average lost 0.13% to 39,291.97 points.
Despite the S&P 500’s gains, decliners outnumbered advancers within the index by a 1.5-to-1 ratio.
Tempus AI rose nearly 4% after JPMorgan, Morgan Stanley and other brokerages initiated trading of the company’s shares with bullish ratings. The genetic-testing company, which has “trivial” revenue from its AI business, is down about 7% from the $37 price set in its June IPO.
Trading volume on U.S. exchanges was relatively light, with 9.6 billion shares traded, compared with an average of 11.6 billion shares over the past 20 sessions. (This article has been refiled to add a deleted letter to AdviceLine.)
(Reporting by Noel Landewicz in Oakland, California; Additional reporting by Lisa Matakkal and Ankika Biswas in Bengaluru; Editing by Pooja Desai and Matthew Lewis)
