By Noel Randewich and Lisa Pauline Mattackal
(Reuters) -The S&P 500 and Nasdaq hit record highs on Tuesday, propelled by gains in Nvidia and other megacaps after U.S. Federal Reserve Chair Jerome Powell told lawmakers that more “good” economic data would strengthen the case for rate cuts.
AI heavyweight Nvidia climbed 1.4%, offsetting declines in other chip stocks, leaving the S&P 500 and Nasdaq with marginal gains for the session.
Microsoft dipped 1.4%, leaving the world’s most valuable company with a $3.4 trillion market capitalization.
The Nasdaq was on track for its sixth straight record-high close as optimism about the growth of AI across the U.S. corporate landscape offset uncertainty around the Fed’s rate-cut path.
In testimony before Congress, Powell said that while inflation “remains above” the 2% soft-landing target, it has been improving in recent months and “more good data would strengthen” the case for interest-rate cuts.
However, the central bank chief insisted he was not “sending any signals about the timing of any future actions.”
Markets have stuck to pricing in 50 basis points of easing for the year, seeing a nearly 72% chance for a 25 bps cut by the Fed’s September meeting, according to CME’s FedWatch. Those bets were at under 50% a month ago.
“The U.S. economy, and currently the U.S. labor market, have been surprisingly resilient through the course of 2024 and our base case is that a recession is not the highest probability outcome, but rather we should continue to expect moderate growth through the balance of this year and into next,” said Bill Northey, senior investment director at U.S. Bank Wealth Management.
Crucial inflation data is also due this week, including Thursday’s consumer price index and the producer price index reading on Friday.
JPMorgan and Wells Fargo were up about 2%, while Citi gained almost 3% ahead of their quarterly reports on Friday, marking the start of second-quarter earnings season.
Reuters reported that the Fed was considering a rule change that could save big banks billions of dollars in capital.
Analysts on average see S&P 500 companies increasing their aggregate earnings per share by 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 was up 0.11% at 5,578.94 points.
The Nasdaq gained 0.09% to 18,419.41 points, while the Dow Jones Industrial Average was down 0.05% at 39,324.94 points.
Tempus AI fell almost 2% after JPMorgan, Morgan Stanley and other brokerages initiated coverage of the stock with bullish ratings. The genetics testing firm, which receives “immaterial” revenue from its AI business, is down 11% from the $37 price set in its June IPO.
Across the U.S. stock market, declining stocks outnumbered rising ones by a 1.2-to-one ratio.
The S&P 500 posted 29 new highs and 15 new lows; the Nasdaq recorded 55 new highs and 126 new lows.
(Reporting by Noel Randewich in Oakland, CaliforniaAdditional reporting by Lisa Mattackal and Ankika Biswas in BengaluruEditing by Pooja Desai and Matthew Lewis)