Stocks Close at All-Time Highs as Powell’s Remarks Fail to Deter Rate Cut Bets

Stocks closed at record highs on Tuesday, fueled by optimism that the Federal Reserve will cut interest rates this year. Jerome Powell’s remarks to Congress did little to change expectations of a rate cut, with financial shares leading gains.

The S&P 500 extended its winning streak to six sessions, the longest since January, as investors bet on policy easing. Powell highlighted signs of a cooling job market, but did not provide a timeline for rate cuts. His comments were seen as preparing the market for a potential cut later in the year.

Powell’s remarks also included updates on regulatory changes for big banks, which could lead to lower capital requirements. This news was well-received by Wall Street lenders, with JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co. all posting gains.

Tech stocks like Tesla Inc. and Nvidia Corp. led the market higher, while Oracle Corp. sank after Elon Musk announced plans to reduce reliance on the company’s cloud technology. Treasuries initially fell but recovered after a successful three-year note auction.

Investors are now looking ahead to Thursday’s inflation report, which could influence the Fed’s decision on rate cuts. The options market is pricing in increased volatility, with traders betting on easing inflation driving rate cuts in 2024.

Overall, the market remains optimistic about a potential rate cut in September, but uncertainties remain. The focus is on incoming data, particularly Thursday’s inflation report, to gauge the Fed’s next move.

In corporate news, Boeing Co. delivered a record number of commercial aircraft in June, while Volkswagen AG lowered its margin outlook due to unexpected costs. Kroger Co. released a list of assets it plans to divest for regulatory approval, and Pfizer Inc. announced a change in its top scientist.

As the market continues to hit new highs, investors are advised to remain cautious, especially in the tech sector. Valuations are stretched, and earnings growth may slow down, raising concerns about a potential market correction.

Overall, the market remains bullish, but uncertainties around inflation, regulatory changes, and corporate performance could impact future gains. Investors are advised to stay informed and monitor key economic indicators for potential market shifts.