Stocks rallied strongly on Wednesday after Federal Reserve Chairman Jerome Powell delivered dovish comments to Congress, with big tech stocks leading the way as usual and a key measure of consumer price inflation tomorrow being the next hurdle.
Step forward House of Representatives CommitteeChairman Powell on Wednesday reiterated the Fed’s commitment to letting data guide interest rate policy, but stocks rose after he suggested the central bank was becoming concerned about a slowing economy and a weak labor market.
“Powell noted that disinflation is set to return after upward price pressures build in the second half of 2023.” Interactive Brokers“He said the most likely path forward for the Fed is monetary easing, but he declined to speculate on when the central bank might take its first steps. He added that recent data shows the job market is softening and that the economy is no longer overheating much like it was before the pandemic.”
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Chairman Powell’s dovish tone is exactly what the market wanted to hear. After all, the market is eager for the Federal Open Market Committee (FOMC) to deliver its first quarter-point cut in the short-term federal funds rate. Although the FOMC has signaled a rate cut only once this year, at its June meeting, a slowing labor market and easing wage pressures make it more likely that the central bank will become more dovish in the coming months.
Indeed, as of July 10, CME Group futures traders predicted a 70% chance that the FOMC would begin easing monetary policy at its September meeting, up from 45% a month earlier. FedWatchTools.
Against this backdrop, the next CPI report, due before the market opens on Thursday, will be closely analysed for clues as to when the first rate cuts might come.
“Tomorrow’s Consumer Price Index (CPI) will likely be the second report of the year where price pressures have reached the Fed’s 2% mark on an annualized month-over-month (m/m) basis,” wrote Interactive Brokers’ Torres. “Inflation reports from January through April have not been cooperative.”
Headline inflation for the year is forecast to rise by 3.1%. Federal Reserve Bank of ClevelandThis is down from 3.3%. May CPI ReportOn a monthly basis, inflation is forecast to have risen 0.1% in June, little changed from the previous month. Core CPI, which excludes volatile food and energy prices, is expected to have risen 3.5% annually in June, or 0.3% monthly.
S&P 500 tops 5,600
At the close, big tech stocks helped two of the three major benchmarks hit new closing highs, with one even hitting a milestone high.
Wider S&P 500 It rose more than 1% to close at 5,663, surpassing the 5,600 mark for the first time. Nasdaq Composite Index It rose 1.2% to close at a record high of 18,647. Dow Jones Industrial Average It rose 1.1% to finish at 39,721.
once again, NVIDIA (NVDA, +2.7%) and apple (AAPL, +1.9) led the market rally. NVDA and AAPL make up 6.7% and 7.01% of the S&P 500, respectively, due to their massive market caps, making them two of the three most heavily weighted stocks in the benchmark index. Microsoft (MSFT, +1.5%) is No. 1 in the S&P 500 with a 7.4% weighting.
On Wednesday, NVIDIA’s stock alone added $87 billion to its market capitalization. Starbucks (SBUX). Apple shareholder wealth increased by $65 billion.
While Nvidia has been the market’s most popular pure bet on all things AI, NFLX has generated outsized returns over the years, and anyone who invested $1,000 in Nvidia stock 20 years ago would be very happy with the gains they made today.
So what about the iPhone maker? Apple’s 20-year earnings are unmatched by any other stock.
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