The S&P 500 rose to a new intraday record Wednesday after Federal Reserve Chairman Jerome Powell said in prepared remarks that the central bank is not close to altering its easy monetary policies.
The broad index traded roughly 0.4% higher. The Dow Jones Industrial Average added around 100 points, or 0.29%. The Nasdaq Composite added about 0.6%, boosted by gains in technology stocks. Apple shares hit an all-time high.
“The markets have gotten very accustomed to ‘low rates for longer’ and Powell’s comments today don’t necessarily change that,” Diane Swonk, chief economist at Grant Thornton, said. “The reality is the Fed has to deal with whatever comes in.”
Powell will say in his required semiannual testimony before Congress on Wednesday that the central bank can wait before it starts to ease its bond purchases despite surging inflation readings, according to remarks released before his testimony. In his prepared statement, Powell said he still expects inflation to moderate.
“At our June meeting, the Committee discussed the economy’s progress toward our goals since we adopted our asset purchase guidance last December. While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue,” Powell said in the prepared remarks.
The central bank chief is set to speak before the House Committee on Financial Services at noon ET. He is scheduled to testify before the Senate on Thursday.
The yield on the 10-year Treasury fell after Powell’s remarks, continuing its decline in recent months. Yields fell even as a reading on producer prices from June showed higher than expected inflation. This follows the biggest jump in the consumer price index since 2008, released on Tuesday.
Investors also assessed second-quarter earnings reports from big banks and other major companies on Wednesday.
Bank of America shares fell after it reported second-quarter revenue of $21.6 billion, just under the $21.8 billion estimate from Refinitiv. Low interest rates knocked net interest income by 6%, the bank said.
BlackRock, the largest asset manager in the world, reported earnings and revenue that topped expectations on Wednesday morning. Shares of BlackRock dropped after the bell.
Shares of Citigroup and Wells Fargo each ticked higher after both companies posted better-than-expected second-quarter earnings results.
Delta Air Lines shares saw modest gains after reporting its first quarterly profit of $652 million since 2019, boosted by federal aid. The airline also said domestic leisure demand has fully recovered and corporate travel increased in the quarter.
In total, 23 S&P 500 companies will post quarterly results this week and second-quarter results are supposed to show a sizable comeback from the depths of the pandemic. Profit growth is expected to total 64% year-over-year for the quarter, according to analyst estimates collected by FactSet.
American Airlines shares jumped after the carrier forecast better revenue and a narrower loss than its previous estimate for the second quarter. The company is set to report quarterly fiscal results on July 22.
UBS raised its December 2021 S&P 500 target to 4,500 on Tuesday, up from a prior forecast of 4,400. The call hinges on strong numbers from second-quarter earnings.
“We believe the equity bull market remains on solid footing driven by huge consumer cash balances, surging business investment, and a still-accommodative Fed,” the firm said in a note to clients.
The S&P 500 is up more than 16% this year and more than 36% in the past 12 months.
Meanwhile, Apple shares jumped to a record high on Wednesday. JPMorgan added the tech giant to its focus list and increased its estimates for iPhone 12 production. The firm also raised its price target for Apple and believes the stock can gain 20% in the next 12 months.
The Dow on Tuesday fell 107 points, or 0.3%, retreating from a record close near 35,000 Monday. The S&P and Nasdaq Composite hit all-time intraday highs on Tuesday before giving back those gains and ultimately closing lower. The S&P 500 dipped 0.35%, while the Nasdaq Composite shed 0.38%, each posting their first negative session in three.
The decline came after the Labor Department said inflation last month advanced at its fastest pace in nearly 13 years. The consumer price index jumped 5.4% from a year earlier, which was above expectations of a 5% increase, according to economists surveyed by Dow Jones. However, since a significant portion of the overall increase came from a jump in used car prices, some were quick to say the inflation will likely be transitory.
Amid a down day on Wall Street, the S&P 500 tech sector bucked the negative trend and closed at a fresh all-time high. The 10 other S&P sectors dipped, with real estate leading the losses.
The hot inflation report overshadowed strong second-quarter earnings reports. JPMorgan and Goldman Sachs kicked off earnings season on Tuesday, with both banks beating top and bottom line estimates. PepsiCo also topped estimates.
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