On Tuesday, the S&P 500 and Nasdaq achieved new record highs, extending their winning streak to six consecutive days, buoyed by optimism over potential interest rate cuts following Federal Reserve Chair Jerome Powell’s semiannual update to Congress.
The S&P 500 (^GSPC) closed slightly higher, marking its 36th record close of the year, while the Nasdaq Composite (^IXIC) also edged up about 0.1% to add to its previous record. In contrast, the Dow Jones Industrial Average (^DJI) fluctuated throughout the day and ended marginally lower.
Stocks surged to new peaks as indications of a slowdown in the US economy bolstered expectations of rate cuts. Powell initiated his biannual policy update with a Senate appearance, highlighting the Fed’s view of the economy. In his prepared remarks, Powell expressed optimism about easing inflationary pressures but emphasized the need for further positive economic data to confirm progress towards the Fed’s 2% inflation target.
Market sentiment remains bullish on expectations that the Fed will reduce interest rates twice this year. Ryan Sweet, chief US economist at Oxford Economics, reaffirmed confidence in a September rate cut, citing increasing certainty in their forecast.
Powell’s upcoming testimony before the House, along with Thursday’s consumer inflation update, are anticipated to provide further clarity and potential market-moving insights.
However, cautious sentiments are emerging as concerns grow over a possible summer downturn, with Mike Wilson, strategist at Morgan Stanley, advocating for a 10% market correction.
