A rally in the world's largest technology companies sent stocks to all-time highs, with Jerome Powell's remarks to Congress not doing much to dissuade traders from betting on Federal Reserve rate cuts this year.
For the first time in its history, the S&P 500 topped 5,600. A renewed bid for megacaps drove the gauge toward its longest win since November, with Nvidia Corp. up 2.5% and Apple Inc. climbing on news it aims to ship 10% more new iPhones after a bumpy 2023.
Treasuries remained fairly stable after a strong $39 billion sale of 10-year bonds. Swaps are pricing in two Fed cuts in 2024 — and higher chances the first comes in September.
As Wall Street geared up for the consumer-price index, Powell said the Fed doesn't need inflation below 2% before cutting rates, while adding officials still have more work to do. He noted the labor market has cooled "pretty significantly." Powell cited a "good ways to go" on the balance-sheet runoff, and said commercial real estate doesn't threaten financial stability.
"The key takeaway from his testimony is the Fed's assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data starting with Thursday's CPI inflation report for June – will deliver a rate cut in September," said Krishna Guha at Evercore.
The S&P 500 climbed for a seventh straight day, while the Nasdaq 100 added 1%. Gold and silver mining stocks rallied on Fed easing bets. Banks underperformed. Google parent Alphabet Inc. has shelved efforts to acquire HubSpot Inc., according to people with knowledge of the matter.
U.S. 10-year yields fell one basis point to 4.29%. Bank of England Chief Economist Huw Pill said the timing of a rate cut is still an "open question," prompting traders to pare bets on August cut. Oil rose as a US holiday boosted demand for gasoline and jet fuel.
"Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell's testimony, CPI/PPI reports, and the beginning of earnings season," said Mark Hackett at Nationwide. "This could be challenged by the CPI reading."
The so-called core CPI, which excludes food and energy costs and is seen as a better measure of underlying inflation, is expected to rise 0.2% in June for a second month. That would mark the smallest back-to-back gains since August — a pace more palatable for Fed officials.
