The S&P 500 and Nasdaq achieved record-high closes on Tuesday, propelled by Nvidia‘s impressive performance following U.S. Federal Reserve Chair Jerome Powell’s testimony, which hinted that further “good” economic data could bolster the case for rate cuts.
Nvidia, the leading AI chipmaker, soared by 2.5%, balancing out declines in other semiconductor stocks. In contrast, Microsoft dipped by 1.4%, while Tesla saw a significant rise of 3.7%, bringing its 2024 gains to 5%.
This marks the Nasdaq’s sixth consecutive record-high close and the S&P 500’s fifth, driven by optimism surrounding AI’s growth across the U.S. corporate sector, which outweighed uncertainties regarding the Fed’s rate-cut trajectory.
In his congressional testimony, Powell acknowledged that while inflation remains above the 2% target, recent improvements suggest that more positive data could support the case for interest-rate cuts. However, he clarified that he was not signaling any specific timeline for future actions.
Market expectations have settled on 50 basis points of easing for the year, with a nearly 72% likelihood of a 25 basis point cut by the Fed’s September meeting, as indicated by CME’s FedWatch. This is a significant shift from a month ago when these bets were below 50%.
Bill Northey, Senior Investment Director at U.S. Bank Wealth Management, noted, “The U.S. economy and labor market have shown surprising resilience throughout 2024. Our base case is that a recession is not the most probable outcome; instead, we anticipate moderate growth for the rest of the year and into the next.”
Key inflation data is expected this week, including the consumer price index on Thursday and the producer price index on Friday.
Bank stocks also saw gains, with JPMorgan and Wells Fargo each climbing over 1%, and Citi rising by 2.8%. These banks are set to release their quarterly results on Friday, marking the beginning of the second-quarter earnings season.
Reuters reported that the Fed is considering a rule change that could save major banks billions of dollars in capital.
Analysts predict that S&P 500 companies will report a 10.1% increase in aggregate earnings per share for the second quarter, up from an 8.2% rise in the first quarter, based on LSEG I/B/E/S data.
The S&P 500 inched up 0.07% to close at 5,576.98 points. The Nasdaq increased by 0.14% to 18,429.29 points, while the Dow Jones Industrial Average fell by 0.13% to 39,291.97 points.
Despite the S&P 500’s rise, declining stocks outnumbered advancing ones within the index by a ratio of 1.5-to-one.
Tempus AI shares jumped nearly 4% after JPMorgan, Morgan Stanley, and other brokerages initiated coverage with bullish ratings. The genetics testing firm, which derives “immaterial” revenue from its AI business, is down approximately 7% from its June IPO price of $37.
Trading volume on U.S. exchanges was relatively light, with 9.6 billion shares traded compared to an average of 11.6 billion shares over the past 20 sessions.
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