During Tuesday's trading session, stocks exhibited a lack of clear direction, with the major indexes oscillating around the unchanged line before closing the day with slight mixed results.
Despite the erratic trading, both the Nasdaq and the S&P 500 once again achieved new record closing highs. The Dow Jones Industrial Average dipped by 52.82 points, or 0.1%, to 39,291.97. In comparison, the Nasdaq increased slightly by 25.55 points, or 0.1%, to 18,429.29, and the S&P 500 edged up by 4.13 points, or 0.1%, to 5,576.98.
This underwhelming performance on Wall Street occurred as traders absorbed Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee.
During his testimony, Powell indicated that more positive economic data would enhance the Fed's confidence in inflation approaching its 2% target, possibly leading to an interest rate cut.
"The Committee has stated that we do not expect it to be appropriate to reduce the target range for the federal funds rate until we have greater confidence that inflation is moving sustainably toward 2%," Powell said in his prepared remarks.
"Incoming data for the first quarter of this year did not support such greater confidence," he continued. "The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%."
Powell's comments come in the context of a recent Commerce Department report, which indicated that the annual growth rate for core consumer prices—excluding food and energy—slowed to 2.6% in May from 2.8% in April.
This Thursday, the Labor Department is scheduled to release its report on consumer price inflation for the month of June.
Economists predict that the annual rate of consumer price growth will decelerate to 3.1% in June from 3.3% in May, while the annual core consumer price growth rate is expected to remain steady at 3.4%.
The Fed Chair also cautioned about the risks associated with maintaining elevated interest rates for an extended period, which could potentially hinder economic growth.
"In light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face," Powell said. "Reducing policy restraint too late or too little could unduly weaken economic activity and employment."
Sector News
The majority of major sectors showed only modest movements, contributing to the overall tepid performance in the broader markets.
However, banking stocks experienced a notable uptick, with the KBW Bank Index climbing by 1.5%.
Brokerage stocks also displayed significant strength, as evidenced by the 1.1% gain in the NYSE Arca Broker/Dealer Index.
Conversely, software stocks faced considerable weakness, leading the Dow Jones U.S. Software Index to fall by 1.6%.
Energy stocks also declined as crude oil prices dropped for the third consecutive session.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region generally moved higher on Tuesday. Japan's Nikkei 225 Index surged by 2.0%, while China's Shanghai Composite Index increased by 1.3%.
In contrast, major European markets moved lower. The French CAC 40 Index plummeted by 1.6%, the German DAX Index slid by 1.3%, and the U.K.'s FTSE 100 Index fell by 0.7%.
In the bond market, treasuries retreated after recent gains, with the yield on the benchmark ten-year note rising by 3.1 basis points to 4.300%.
Looking Ahead
Trading activity on Wednesday may be muted as traders await the release of the highly anticipated consumer price inflation report on Thursday.
