Wall Street stock indexes closed mixed Tuesday after Federal Reserve Chairman Jerome Powell's remarks to Congress did little to change market expectations about the timing of a Fed rate cut.
The S&P 500 and Nasdaq Composite each rose 0.1%, bringing the indexes to record highs for the second time this week.
The Dow Jones Industrial Average fell 0.1% after spending much of the day swinging between small gains and losses.
In his testimony Tuesday before the Senate Banking Committee, Powell reiterated that inflation has decreased Interest rates have risen significantly over the past two years, though they remain above the central bank's 2% target. He also noted that there is a risk that the Fed could decide to cut interest rates too late or too little, warning that either scenario could end up weakening the economy and the jobs market.
Powell’s testimony didn’t provide much new guidance on the Fed’s plans for when it might cut interest rates. Traders are still betting there’s a 70% chance the central bank will cut its key interest rate as early as September, according to data from CME Group.
The market really has no surprises today and that allows it to move modestly higher, said Lisa Erickson, head of public markets at US Bank Wealth Management.
Treasury yields edged higher in the bond market. The yield on the 10-year Treasury note rose to 4.30% from 4.28% late Monday.
The Fed has remained cautious about any interest rate decision, keeping its benchmark interest rate at its highest level in more than two decades while cautiously awaiting further signals that inflation continues to slow.
Although prices have fallen sharply over the past two years due to the Fed's interest rate hikes, the central bank's goal is to bring inflation back to its 2% target without slowing economic growth too much.
Most measures of inflation show it easing, albeit at a much slower pace through 2024. The rate is hovering around 3% and continues to put pressure on consumers, particularly those on lower incomes.
In his testimony Tuesday, Powell stressed that high inflation is not the only risk we face. Cutting rates too late or too little could unduly weaken economic activity and employment, he said.
A strong jobs market and healthy consumer spending have supported economic growth, although the pace has slowed. Consumer spending has also declined as inflation prompts many people to prioritize necessities over discretionary goods. Borrowing costs are also higher because of high interest rates, putting additional pressure on consumers.
Wall Street is hoping for rate cuts this year, which could ease pressure on consumers and investors. Most experts expect the Fed to cut rates this year, but not before September. The Fed's next policy meeting is later this month.
If the Fed fails to start cutting rates in the coming months, the economy risks weakening further in the near term and would also delay when we expect the economy to pick up speed again, said Dave Sekera, chief U.S. market strategist at Morningstar.
Gains in banks helped offset declines in industrials, energy and other sectors of the S&P 500 index on Tuesday. JPMorgan Chase gained 1.2% and Bank of America gained 2%.
Chipmaker Intel rose another 1.8% after gaining 6.2% on Monday as bullish analysts suggested the company's upcoming processors will be in high demand for AI-related products.
Consumer goods company Helen of Troy, which makes Osprey and OXO products, fell 27.7% after reporting first-quarter results that fell well short of expectations.
Stocks have gained ground steadily in recent months, helping propel the S&P 500 to 36 record highs so far this year.
Overall, the S&P 500 rose 4.13 points to 5,576.98. The Nasdaq gained 25.55 points to close at 18,429.29. The Dow Jones lost 52.82 points to 39,291.97.
Powell is scheduled to testify before the House Financial Services Committee on Wednesday. His testimony comes ahead of further inflation updates later this week.
Wall Street expects the government's latest report, released Thursday, to show consumer prices falling to 3.1% in June, from 3.3% in May. A report on wholesale inflation, before costs are passed on to consumers, is due Friday.
Traders are also eagerly awaiting several earnings reports this week. Delta Air Lines will report results on Thursday.
JPMorgan, Citigroup and Wells Fargo will report earnings on Friday. Those updates could provide a clearer picture of consumer debt levels and whether banks are worried about payments and possible late payments.
AP business writer Christopher Rugaber contributed to this report.
