Fed Signals Inflation Progress as S&P 500, Nasdaq Hit Records

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The S&P 500 and the Nasdaq Composite closed at new record highs on Tuesday following comments from Federal Reserve Chair Jerome Powell, who noted that inflation has shown signs of improvement in recent months, though more work remains. The S&P 500 edged up 0.1% to finish at 5,577, while the technology-heavy Nasdaq Composite also climbed 0.1%, closing at 18,429.3. In contrast, the Dow Jones Industrial Average dipped by 0.1%, ending the day at 39,292. The financial sector led the gainers, whereas materials experienced the largest declines.

Powell, in his prepared remarks to the Senate Committee on Banking, Housing, and Urban Affairs, stated, “More good inflation data would strengthen the case for potential monetary policy easing in the US.” He emphasized that the Federal Open Market Committee (FOMC) does not anticipate reducing the target range for the federal funds rate until there is greater confidence that inflation is moving sustainably toward the 2% target. Although first-quarter inflation data fell short, recent readings have shown modest progress, he added.

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To combat inflation, the FOMC raised its benchmark lending rate by 525 basis points between March 2022 and July 2023. Rates have since remained unchanged, with the latest pause occurring last month. Powell is scheduled to appear before the House Financial Services Committee on Wednesday.

Meanwhile, US Treasury yields saw an uptick on Tuesday, with the 10-year yield rising 2.9 basis points to 4.30% and the two-year rate increasing by one basis point to 4.62%.

In economic developments, small business optimism in the US reached its highest level this year in June, although inflation remained a significant concern for business owners, according to the National Federation of Independent Business’ latest survey.

West Texas Intermediate crude oil prices fell 0.9%, settling at $81.61 per barrel.

In corporate news, Incyte (INCY) shares surged 4.4%, leading the S&P 500, after RBC raised its price target on the stock from $60 to $61 while maintaining its sector perform rating. Conversely, Albemarle (ALB) experienced the steepest drop on the S&P 500, plummeting 8.8% following price target cuts from UBS, Oppenheimer, and Baird.

Helen of Troy (HELE) reduced its full-year outlook after posting disappointing fiscal first-quarter results due to weak consumer demand, causing its shares to plunge nearly 28%.

In the commodities market, gold prices increased by 0.3% to $2,371 per troy ounce, and silver rose by 0.6% to $31.10 per ounce.