The stock index saw a slight increase on Wednesday, fueled by optimism about potential rate cuts following Federal Reserve chair Jerome Powell’s recent testimony to Congress. The S&P 500 rose by 0.3%, the Nasdaq Composite by 0.5%, and the Dow by 0.1%.
The 10-year Treasury yield dropped by 1 basis point to 4.29%, while the 2-year yield decreased by 1 basis point to 4.63%. Powell’s testimony will continue with another appearance before the House Financial Services Committee today.
During his testimony, Powell maintained a balanced tone and emphasized the Federal Reserve’s need for “greater confidence” in inflation reaching its target. There was also a recognition of the risks of waiting too long to make adjustments to interest rates.
UBS’ Paul Donovan noted concerns about the timing of potential rate cuts, given the significant decrease in inflation and rising real rates. Pantheon Macroeconomics expects a clear signal for rate reductions from Powell at the Jackson Hole symposium in late August.
Investors are eagerly awaiting the June consumer price index report, which is expected to show a 0.1% monthly increase and a 3.1% rise on a year-on-year basis. Core CPI is also anticipated to increase by 0.2% monthly and 3.4% yearly.
In addition, wholesale inventories rose by 0.6% in May, meeting expectations. The results of a $39 billion, 10-year note auction are also expected to be released later in the day.