US Stocks Surge as Powell Fuels Rate Cut Hopes

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US stocks surged on Wednesday, setting the stage for yet another record high as traders absorbed Federal Reserve Chair Jerome Powell’s comments before Congress. Major indexes opened stronger, sending bond yields slightly downward in the process.

Investor sentiment was buoyed by Powell’s somewhat dovish stance on potential rate cuts. Addressing lawmakers on Tuesday, Powell indicated that more favorable inflation data would reinforce the Fed’s conviction that it is successfully steering inflation towards its 2% target. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell cautioned.

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Despite Powell’s guidance, Fed fund futures revealed a steady rate outlook. Investors are expecting around two rate cuts by the end of the year—yet there’s a slight increase in the possibility of three rate cuts by December according to the CME FedWatch tool.

B. Riley Wealth’s chief market strategist, Art Hogan, remarked, “The Fed is definitely inching closer to cutting rates due to the ‘considerable progress’ that has been made in taming inflation.”

Powell is scheduled for the second phase of his congressional testimony before the Senate Banking Committee later on Wednesday. Meanwhile, markets are also eagerly awaiting Thursday’s inflation report, which will play a critical role as FOMC members prepare for their end-of-month policy discussion.

As of shortly after the opening bell on Wednesday, the S&P 500 was up 0.20% at 5,589.31. The Dow Jones Industrial Average rose by 26.37 points or 0.07%, reaching 39,318.34, while the Nasdaq composite increased by 0.39% to 18,500.46.

In other noteworthy developments, billionaire investor Bill Gross compared Tesla’s stock movements to those of a meme stock. Additionally, Russia’s FX trading has shifted almost entirely to China’s yuan due to sanctions restricting the use of the dollar.

In commodities, West Texas Intermediate crude saw a slight uptick of 0.06% to $81.46 a barrel, whereas Brent crude, the global benchmark, dipped marginally by 0.05% to $84.62 a barrel. Gold prices climbed 0.63% to $2,378 per ounce. The 10-year Treasury yield decreased by one basis point, standing at 4.283%. Bitcoin also saw an increase, rising 1.3% to $58,014.