Powell keeps Wall Street in limbo
The latest statements from the US Federal Reserve chairman are sending Wall Street on a search for direction. Powell refused to show his cards during a hearing before the US Congress. Meanwhile, investors are turning to AI stock.
The stock market ended trading for the day with only slight changes. Both the S&P-500 and Nasdaq indices reached new record highs, while the Dow Jones Index closed slightly in the negative. Powell's anticipated statements before the US Congress Financial Committee caused brief movement only in the bond and foreign exchange markets.
Powell kept his options open regarding the timing of a rate cut. "We will continue to make decisions from meeting to meeting," he said according to a prepared statement. According to Powell, the employment data from the previous week sends a "quite clear signal" that conditions on the labor market have significantly cooled off compared to two years ago. When asked about the possible timing of the next rate adjustment, Powell said, "I will not send any signals about future actions." At the same time, he hinted that the Fed is closely monitoring when interest rates should be lowered, as inflation is once again declining and the labor market is showing signs of cooling.
The Dow Jones Index fell 0.1 percent to 39,292 points. The S&P-500 and Nasdaq Composite each rose 0.1 percent. There were 1,055 (Monday: 1,502) winning stocks, while 1,759 (1,300) losing stocks outnumbered them. 73 (94) titles remained unchanged. The focus is also on the beginning US earnings season. There is a peak on Friday with the second-quarter results from JP Morgan, Wells Fargo, and Citigroup.
Technology sector continues to lead
Since interest rate cut expectations have been scaled back, technology values have once again been the main drivers of the latest index gains. The semiconductor sector in the S&P-500 rose by 1.3 percent. AI-related stocks were in demand again. Intel gained another 1.8 percent. The day before, its price had risen by 6.2 percent. The title has gained in six of the last seven sessions. Most recently, Melius Research had expressed positive views on the business performance in the second half of the year. Other technology stocks like AI pioneer Nvidia (+2.5%) also continued to rise.
For Oracle's stock, it went down 3.0 percent. The software company is no longer in talks with Elon Musk's xAI startup for an expanded cloud computing deal, according to The Information. The technology newspaper reported in May that xAI and Oracle were negotiating a multi-year agreement to provide cloud servers for xAI worth up to $10 billion. After a rally of 12 percent the day before, Corning gained another 3.8 percent. The special glass manufacturer raised its outlook.
Powell statements move dollar and bonds little
The dollar showed little reaction to Powell's statements overall. The Dollar Index gained 0.1 percent and remained at its pre-hearing level. For a larger impulse, the inflation data on Thursday are expected to have a greater impact. The interest rate cut expectations had once again gained momentum.
At Rentenmarkt, yields rose briefly with Powell's statements but gave back gains quickly. The yield on 10-year papers dropped by 1.4 basis points to 4.29 percent and was at the same level as before the listening. Ian Shepherdson of Pantheon commented that "between the lines, Powell's base case is for a easing in September." He added that the Symposium in Jackson Hole next month "provides an ideal opportunity" for Powell to signal a potential rate cut. "Further employment and inflation data will be released before then, and we expect mostly weak numbers", added the participant.
At the Oil market, concerns over damaged infrastructure from Hurricane Beryl in the southern US were eased slightly - prices fell moderately. For the Brent and WTI listings, it went down by up to 1.2 percent. "First signs indicate that most energy infrastructure remains intact", ruled ING.
The Gold price showed little reaction to Powell's statements. The fine ounce gained 0.2 percent to $2,364. "It looks like the Fed is making progress in bringing the economy into better balance and getting a handle on inflation", noted ING analysts. If the data continues to move in the right direction, the probability of a rate cut in September will continue to rise, according to the analysts.
Further information on today's stock market developments can be found here.
The tech sector's strong performance on Wall Street continues, with AI-related stocks like Intel and Nvidia seeing gains. Meanwhile, Jerome Powell, the Federal Reserve chairman, maintained his stance on interest rate policy, indicating that the Fed is closely monitoring when a rate cut might be necessary due to declining inflation and signs of a cooling labor market.
During a hearing before the US Congress Financial Committee, Powell refused to provide any hints about future interest rate adjustments, keeping his options open regarding the timing of a potential rate cut. Despite Powell's statements, the interest rate cut expectations have gained momentum, leading to a rise in yields at Rentenmarkt, but only briefly.
