Wall Street Continues to Break Records as Stocks Advance

Taiwan Semiconductor, or TSMC, makes the chips for Nvidia and others that have pushed the business world to embrace artificial intelligence technology. The promise of big future profits from AI has propelled Nvidia in particular to dizzying heights over the past year, and Nvidia rose another 2.5% on Wednesday, bringing its gain for the year to 171.8%. It’s once again the most powerful force pushing the S&P 500 higher.

The excitement around AI is a major reason why the U.S. stock market has hit record highs despite slowing economic growth and tightening pressure on low-income households. So I have hope that inflation Growth is slowing enough for the Federal Reserve to make long-awaited interest rate cuts later this year.

Fed Chairman Jerome Powell returned to Capitol Hill to testify on interest rates, where he echoed many of his comments from the day before. He said he was sending “no signals” about when rate cuts might come, but he was aware of the risks of being too late.

“We’re looking at both sides of the risk of waiting too long or not long enough to get your key interest rate back to its highest level in more than two decades, where it’s been for almost a year,” Powell said. Cutting rates too early could allow inflation to pick up again, while waiting too long could allow the slowdown in the economy to turn into a recession.

Much of Wall Street expects the Fed to begin cutting its main interest rate in September, but traders have a long history of prematurity in their calls. Powell welcomed recent reports showing an improvement in inflation after a discouraging start to the year, but he again said the Fed lacked confidence that inflation was moving sustainably toward its 2% target.

“More positive data would boost our confidence and pave the way for a reduction,” Powell said.

The yield on 10-year Treasury notes fell slightly to 4.28% from 4.30% late Tuesday and 4.70% since April. This development since the spring is significant for the bond market and provides support for stock prices.

The yield on two-year Treasury notes, which moves more in line with expectations of Fed action, was holding at 4.62%, where it was late Tuesday.

A report coming out Thursday could cause more wild swings in bond and stock markets. That’s when the U.S. government will release its latest monthly update on inflation. Economists expect it to show that American consumers paid 3.1% higher prices for food, airfare and everything else in June than a year earlier. That would be slightly slower than May’s 3.3% inflation rate.

This week will also mark the unofficial start of the new earnings season. Delta Air Lines, JPMorgan Chase and others will report their spring earnings from April through June, and Wall Street is hoping that the S&P 500 companies will post their strongest growth in more than two years.

Smart Global Holdings, a technology company specializing in computing, memory and LEDs, rose 21.6% after reporting profit and revenue that beat analysts' expectations for the latest quarter.

LegalZoom lost 25.2% of its value. Its CEO, Dan Wernikoff, announced his departure and resigned from the board of directors. The company also lowered its revenue forecast for the full year.

On foreign stock markets, Nikkei 225 in Japan Japan rose 0.6% to close at a new record. It has jumped 25% since the start of the year, more than the U.S. stock market, as enthusiasm for artificial intelligence has boosted its technology stocks. Its exporters are also benefiting from the yen’s decline against the dollar, which can boost their profits.

Other Asian markets posted mixed performances, while European indices were higher.

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AP Business reporters Matt Ott and Elaine Kurtenbach contributed to this report.