Powell’s Testimony Sends S&P 500 to Record Highs – What’s Next for Markets?

New York, NY – Investors witnessed the S&P 500 reaching a new record high on Tuesday as they absorbed crucial testimony from Federal Reserve Chair Jerome Powell. The broad market index saw a 0.2% rise to an all-time high, while the Nasdaq Composite also hit a record high and was up by 0.2%. However, the Dow Jones Industrial Average lagged behind, losing 50 points or 0.1%. Powell’s prepared remarks hinted at the possibility of a less restrictive stance by the central bank. He emphasized the importance of not keeping interest rates elevated for too long, as it could pose a risk to further economic growth.

Powell stated that reducing policy restraint too late or too little might weaken economic activity and employment. He expressed confidence in the inflation moving towards 2 percent if more good data were to surface. Powell is scheduled to continue his testimony before Congress on Wednesday, followed by key inflation data releases later in the week. This includes the June consumer price index on Thursday and the producer price index on Friday.

Market analyst David Russell noted that Powell has started to pay attention to the weakening labor market. He recognized the restrictive policy and the progress made on inflation, suggesting a potential ‘Powell put’ later in the year. Nvidia shares saw a 4% increase after KeyBanc raised its price target on the chipmaker. The VanEck Semiconductor ETF (SMH) also gained 1%, while tech giants such as Apple and Google-parent Alphabet traded slightly higher.

Despite the S&P 500 reaching a fresh record high, the lack of market breadth hindered its gains. Shares of McDonald’s and Microsoft experienced declines, holding back the Dow. Pernas Research co-founder Deiya Pernas noted that tech leaders leveraged to AI tailwinds were driving the S&P 500, while the rest of the market significantly lagged. The trend of AI exuberance is expected to continue in the near to intermediate term.