Stock market today: S&P 500, Nasdaq build on record highs as Powell testimony keeps rate cut hopes alive

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The S&P 500 and Nasdaq nabbed new record closes on Tuesday (and also each notched their sixth straight day of gains) as rate cut hopes remained intact after Federal Reserve chair Jerome Powell kicked off his semiannual update to Congress. The S&P 500 (^GSPC) finished just above the flatline to book its 36th record close of the year, while the tech-heavy Nasdaq Composite (^IXIC) also built on its previous record to close up about 0.1%. The Dow Jones Industrial Average (^DJI), which seesawed throughout the trading session, closed down around 0.1%. Stocks have achieved fresh all-time highs as signs of a US economic slowdown bolster bets on interest-rate cuts. Powell shed light on the Fed's picture of the economy, commencing his twice-yearly policy update to Congress on Tuesday with an appearance in the Senate. In prepared remarks, the central bank leader said he's encouraged by evidence of cooler inflation, but that the Fed still needs more "good data" to be confident that inflation is moving towards its 2% target. Traders still placed bets that the Fed will cut interest rates twice this year. "We’re increasingly confident in our forecast that the Fed will cut rates in September," wrote Oxford Economics chief US economist Ryan Sweet. Powell will appear before the House on Wednesday, setting the stage for a key update on consumer inflation on Thursday — all potential catalysts for stocks if they confirm a cooling. But a note of caution is seeping into the market as the idea of a summer pullback gets more backers, with Morgan Stanley strategist Mike Wilson calling for a 10% correction. LIVE COVERAGE IS OVER 10 updates S&P 500, Nasdaq notch records (again) Another record-setting close for the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC). Both indexes finished the day up about 0.1% while the Dow Jones Industrial Average (^DJI), which seesawed throughout the trading session, closed down around 0.1%. The moves come as Federal Reserve chair Jerome Powell kicked off his semiannual update to Congress. Powell stuck to his usual script, saying he's encouraged by evidence of cooler inflation, but that the Fed still needs more "good data" to be confident that inflation is moving towards its 2% target. Traders still placed bets that the Fed will cut interest rates twice this year following his testimony. How to play the AI trade? Broaden your exposure There's been massive interest in artificial intelligence (AI). So much so that the Magnificent 7 has driven about two-thirds of the S&P 500 returns. But is it a bubble? Citi says no — at least for now. "Sentiment around stocks with high exposure to AI is the most elevated it has been since 2019," Drew Pettit, director or US equity strategy at Citi, wrote in a new research note on Tuesday. "We continue to suggest investors take profits in AI highfliers, notably the enablers (ex. Semiconductors), and rebalance towards a broader array of AI stocks across the value chain." In other words, take the AI-driven profits and run to other use them to broaden your AI exposure across your portfolio. "Practically speaking, not owning, or outright positioning against, AI would be difficult for many on the buy-side." (Source: Citi Research) More signs of market breadth ahead of earnings season Earnings season is about to kick off. And analysts are watching for more signs of market breadth. "The second quarter is expected to be the first earnings per share (EPS) growth quarter for the other 493 S&P 500 companies since Q4 2022, whereas growth for the Mag. 7 is expected to slow for the second straight quarter and again in Q3," wrote Ohsung Kwon, equity and quant strategist at Bank of America. "Growth is broadening out and so should the market." Earnings season will kick off on Friday with the big banks like JPMorgan (JPM) and Citigroup (C) reporting quarterly results. As Yahoo Finance's David Hollerith pointed out, regional banks remain a key concern for Wall Street. Regional banks are expected to report a 26% year-over-year decline in earnings growth. BP, Baidu, Novo Nordisk: Stocks trending in afternoon trading Here are some stocks trending on the Yahoo Finance homepage in afternoon trading on Tuesday: BP ( BP ): The company's US-listed shares fell about 4% on Tuesday after the energy giant warned of a refining slump and factory-linked writedown of up to $2 billion. Baidu ( BIDU ): Shares of the Chinese tech conglomerate climbed 8% on Tuesday after Beijing said it will support the introduction of robotaxis in ride hailing and car rental fleets. Baidu's Apollo platform, which is its open-source platform for autonomous driving, has rapidly expanded its robotaxi operations over the past year. Novo Nordisk ( NVO ) : Shares of the global healthcare company slipped more than 1% after Wegovy lost out to Eli Lilly's (LLY) Mounjaro in an analysis of rival weight-loss drugs. In a statement to Yahoo Finance, Novo claimed it wasn't a fair apples-to-apples comparison and that the study had some key deficiencies. Tesla stock on track for its tenth straight day of gains Tesla's stock (TSLA) is on track for its tenth straight day of gains as shares bounced about 4% higher in mid-afternoon trading on Tuesday. The positive moves mean Tesla has erased all of its year-to-date losses with the stock up about 5% since the start of the year. Shares have also surged about 75% since hitting 52-week lows in April. Analysts have credited the company's second-quarter vehicle production and deliveries numbers, which beat Wall Street expectations, along with further momentum surrounding Tesla's artificial intelligence businesses. "All of a sudden, the market is valuing the growth potential for Tesla," Seth Goldstein, equity strategist at Morningstar, told Yahoo Finance. "Q1 deliveries surprised to the downside so the market was assuming a lower growth rate and that's why we've seen the large rally." Tesla is set to report its next batch of quarterly results on July 23 after the market close. It's also teased the development of more affordable electric vehicles (EVs), which investors see as another key catalyst for growth. But Goldstein said the company will have to lay out a "solid, concrete timeline" when it comes to the rollout of those cars, which the company previously said could happen as soon as 2025. "We need to see that being met or pushed up earlier so that [Wall Street] can assume Tesla will see a second wave of deliveries growth starting in 2026," he said. "As long as that narrative remains intact, I think that the stock will be okay. But if that's pushed out or if management sounds more uncertain that that's going to happen, then I think we could see the stock falter." Outside of earnings and deliveries, investors will also be on the lookout for another growth opportunity: robotaxis. The company is set to unveil its much-anticipated robotaxi on Aug. 8. Treasury yields rise as stocks hold near records US treasury yields moved higher as Federal Reserve Chair Jerome Powell delivered testimony on Capitol Hill early Tuesday. The benchmark 10-year treasury yield (^TNX) inched up about 6 basis points to trade near 4.33%. The 30-year yield (^TYX) also moved about 6 basis points higher to trade around 4.51%. In prepared remarks, Powell said he was encouraged by evidence of cooler inflation but that more "good data" was needed in order to instill more confidence the Fed was on its way to reaching its 2% inflation target. He also warned that cutting rates too fast or too soon would threaten the "modest" progress on inflation. Stocks, however, continued to hover near record high as traders still placed bets on two interest rate cuts to come this year. "Federal Reserve Chair Jerome Powell's testimony is further evidence that the central bank is moving closer to cutting interest rates as its reaction function is better balanced between inflation and the labor market now than in the past couple of years," wrote Oxford Economics chief US economist Ryan Sweet. "We’re increasingly confident in our forecast that the Fed will cut rates in September," he added. "But the path of interest rates is more uncertain than usual because the outcome of the presidential election will have a huge bearing on whether the central bank should continue to ease, pause, or even resume hiking." Powell: Fed needs more 'good data' in order to cut rates Federal Reserve Chair Jerome Powell kicked off his semiannual update to Congress on Tuesday, appearing before the Senate Banking Committee. He will appear before the House Financial Services Committee tomorrow. Yahoo Finance's Jennifer Schonberger has the story: Powell indicated the central bank is inching closer to feeling comfortable about interest rate cuts, saying that he was encouraged by evidence of cooler inflation and that more "good data" would help get the Fed to where it wants to be. The inflation numbers "have shown some modest further progress" after some hotter readings in the first quarter, "and more good data would strengthen our confidence that inflation is moving sustainably toward 2%,” he said in prepared testimony before US lawmakers Tuesday. It is the second time in the last week Powell has offered optimism about the inflation picture. Last Tuesday he noted that the last two inflation readings from April and May "do suggest that we are getting back on a disinflationary path." Federal Reserve Board Chair Jerome Powell speaks at a news conference at the Federal Reserve in Washington, June 12, 2024. (AP Photo/Susan Walsh, File) (ASSOCIATED PRESS) The next reading on inflation as measured by the Consumer Price Index is due out Thursday. It isn’t expected to show inflation getting worse, but it also isn’t expected to drop, either. Based on “core” CPI — which excludes volatile food and energy prices the Fed can’t control — inflation is expected to hold steady at 3.4% in June from the same level in May. Powell noted in his prepared testimony the Fed will continue to make decisions on monetary policy meeting by meeting. He reiterated that lowering rates too quickly could reverse progress on bringing inflation down, while keeping rates elevated for too long could weaken the economy and the job market. Democrats are expected to press Powell to lower rates soon, while Republicans are likely to press Powell on bank capital rules and emphasize that rates shouldn't be cut too close to the election in November. Powell in his testimony underscored that Congress has entrusted the Fed with the operational independence that is needed to take a “longer-term perspective” in the pursuit of its dual mandate of maximum employment and stable prices. S&P 500, Nasdaq edge up ahead of Powell US stocks opened in mostly positive territory on Tuesday, just ahead of Federal Reserve Chair Jerome Powell's twice-yearly policy update to Congress. Stocks have achieved fresh all-time highs as signs of a US economic slowdown bolster bets on interest rate cuts. On Tuesday, the S&P 500 (^GSPC) edged up about 0.2% after the index booked its 35th record close of the year on Monday, while those on the tech-heavy Nasdaq Composite (^IXIC) led the way higher with a roughly 0.3% gain following its own record close the day prior. The Dow Jones Industrial Average (^DJI) remained the only major index in the red, falling about 0.1%. Interesting observation on Chipotle Chipotle (CMG) continues to be a beloved brand, despite TikTok posts suggesting the chain has cut back on its notorious giant portion sizes. Interestingly, the company's $15 bowls and $10 burritos appear to be more beloved by lower-income households. Stifel analyst Chris O'Cull coming in hot with this research today: "After reviewing mobile location data suggesting strong traffic performance in 2Q, we raised our same-restaurant sales projection to 10% from 8.5% (Street 8.8%). Interestingly, while the strength continued the broad-based trend from 1Q, growth from lower-income consumers outpaced growth from middle- and high-income consumers during the quarter. Given industry comments about weaker spending by lower-income consumers, we believe the positive value perception of CMG across all income segments contributed to the traffic performance." O'Cull reiterated his Buy rating on the stock. Lower income households flock to Chipotle given greater value perception. (Stifel) Morning Apple vibes For those of you keeping score at home: Apple's (AAPL) market cap is now at $3.5 trillion and Nvidia's (NVDA) is at $3.15 trillion. To that end, good note out this morning from Piper Sandler analyst Matt Farrell after a 30% run in Apple since April: "Since early April, Apple is up over 30% (compared to S&P500 up over 5%), on the back of 1) Apple Intelligence excitement and 2) a potential bounce back in iPhone shipments in China. From our perspective, the excitement is warranted, as AI could be a needle mover for upgrades. In addition, a return to growth in iPhone sales in China could create a tailwind as well in the second half. However, given the current valuation (~32x near-term consensus EPS) and the growing risk of a consumer spending headwind, we feel like a lot of good news is already priced into the stock." Farrell is sticking with a Neutral rating on the stock.