4.10pm: Powell's testimony boosts markets
The S&P 500 and Nasdaq closed at new record highs, marking their sixth consecutive day of gains amid expectations of Federal Reserve rate cuts following Jerome Powell's congressional testimony.
At the close, the S&P 500 edged 0.1% higher to finish at 5,577 points, while the Nasdaq also rose 0.1% at 18,429. Meanwhile, the Dow Jones fluctuated but ultimately closed 0.1% lower at 39.292.
In his remarks earlier, Powell highlighted the Fed's cautious optimism about inflation trends, with markets anticipating potential rate cuts as economic indicators suggest a slowdown.
“After a lack of progress toward our 2% inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell stated. He added that “more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”
The chair’s cautious optimism marks a shift from the Fed’s previous stance, indicating that the central bank is becoming more open to the idea of rate cuts.
1.15pm: Powell could signal cuts next month
Several economists say that after his comments today, the Jackson Hole symposium in August could be a key opportunity for Jerome Powell to give a more decisive indication about a rate cut.
Comments from the Fed head today were little different from his June FOMC statement, says Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"All told, Mr. Powell remains reluctant to signal the onset of monetary easing well in advance, scarred by the burst of inflation in Q1, but reading between the lines we think his base case is a September easing.
"The Jackson Hole symposium, held between August 22 and 24, provides an ideal opportunity for him to give customary notice of an impending policy change."
That will follow one more employment report and two CPI reports, where Shepherson expects "mostly soft numbers", with a 0.25% rate cut in September and then half-point cuts each at the November and December meetings, assuming the employment and inflation data weaken sharply.
Economist James Knightley at ING Bank said the Jackson Hole symposium in August "could firm up expectations of a September cut".
"Our position is that the Fed doesn’t want to cause a recession if they can avoid it and if the data allows we expect the Federal Reserve to start moving monetary policy from 'restrictive' territory to 'slightly less' restrictive policy from September."
This would require core inflation continuing to be 0.2% month-on-month or below, with unemployment to continue its rise towards 4.3%, while consumer spending growth slows from the 3%-plus annualised rate last year to 1.6% and decelerate further."
12.30pm: Markets react to Powell comments
The early gains of the Nasdaq have been cut to almost nothing, with the Nasdaq Composite index now flat.
However, the Dow Jones has picked up and climbing out of the red, now up 0.2%, in line with the S&P 500.
In the background were comments from Fed chair Jerome Powell that suggested the case for interest rate cuts is becoming stronger.
Powell told Congress that the US is "no longer an overheated economy" and that the jobs market has "cooled considerably".
Powell told the Senate Banking Committee that "the labor market appears to be fully back in balance", but said he was "not going to be sending any signals about the timing of any future actions" on interest rates today.
Analysts said the comments were welcome news for stock market investors.
9.50am: Nasdaq off to strong start as Nvidia, Intel rally
US markets got off to a solid start today, with the Nasdaq 100 tech index surging around 70 points in opening trades.
It brings the index to a fresh all-time high of 20,506.
Microchip stocks led the surge, with Intel Corp (NASDAQ:INTC, ETR:INL), Broadcom, Marvell Technology, Nvidia Corp and ARM Holdings plc all posting low-single-digit gains.
At $131.75 per share, Nvidia is just a few percentage points off its all-time high from less than a month ago.
The Dow Jones Industrial Average, on the other hand, has slipped around 0.3% while the broader S&P 500 is up around 0.2%.
8.24am: Nasdaq to hit new record
Futures contracts have the Nasdaq 100 index opening 66 points, or 0.3% higher, when Tuesday trading gets underway.
It will make for a new all-time record for the tech-focused index following a strong performance on Monday.
The Nasdaq notched a record yesterday driven by a cooling jobs report, bolstering expectations of a Federal Reserve rate cut in September.
The Dow Jones Industrial Index and the broader S&P 500 are expected to open 29 points and 10 points respectively.
On the macroeconomic calendar, the market will be looking for hints on forward interest rate policy during Federal Reserve chair Jerome Powell’s testimony.