The S&P 500 rose to a new intraday record on Wednesday after Federal Reserve Chairman Jerome Powell said in prepared remarks that the central bank would not change its loose monetary policy just yet.
The broad index was around 0.4% higher. The Dow Jones Industrial Average rose 115 points, or 0.33%. The Nasdaq Composite was up around 0.5%, fueled by gains in technology stocks. Apple shares hit an all-time high.
"Markets have become very used to 'long-term low rates,' and Powell's comments today don't necessarily change that," said Diane Swonk, chief economist at Grant Thornton. "The reality is that the Fed has to deal with whatever comes in."
Powell, in his semi-annual testimony to Congress on Wednesday, will say the central bank can wait before easing bond purchases despite rising inflation, according to comments released prior to his testimony. In his prepared statement, Powell said he continued to expect moderate inflation.
“At our June meeting, the committee discussed the progress made by the economy towards our goals since we adopted our asset buying guidelines last December. While the achievement of the 'significant further progress' standard is still a long way off, participants expect progress to continue, ”Powell said in the prepared remarks.
The Fed governor will address the House of Representatives Financial Services Committee at noon ET. He is due to testify in front of the Senate on Thursday.
The 10-year Treasury yield fell on Powell's remarks and has continued to decline in recent months. Yields fell despite June producer prices showing higher than expected inflation. This follows the largest increase in the consumer price index since 2008, released on Tuesday.
Investors also rated earnings reports from major banks and other major corporations for the second quarter on Wednesday.
Bank of America's shares fell just below Refinitiv's estimate of $ 21.8 billion after reporting $ 21.6 billion in revenue in the second quarter. Low interest rates have reduced net interest income by 6%, the bank said.
BlackRock, the world's largest wealth manager, reported profits and revenues that exceeded expectations on Wednesday morning. BlackRock's shares fell after the bell.
Citigroup and Wells Fargo stocks rose higher after both companies posted better-than-expected earnings results in the second quarter.
Delta Air Lines shares posted modest gains after reporting their first quarterly profit of $ 652 million since 2019, which was funded by federal aid. The airline also said domestic vacation demand fully recovered and business travel increased during the quarter.
A total of 23 S&P 500 companies will be releasing quarterly results this week and the second quarter results are set to show a sizeable comeback from the depths of the pandemic. FactSet analyst estimates that earnings are expected to grow 64% year over year for the quarter.
American Airlines stocks rose after the airline forecast better revenues and a smaller loss than its previous estimate for the second quarter. The company will publish quarterly results on July 22nd.
UBS on Tuesday raised its S&P 500 target for December 2021 to 4,500, up from an earlier forecast of 4,400. The call depends on strong numbers from the second quarter results.
"We believe the stock bull market will remain on a solid footing, fueled by huge consumer cash holdings, rising corporate investment and a still accommodating Fed," the company said in a statement to customers.
The S&P 500 is up more than 16% this year and more than 36% in the past 12 months.
Meanwhile, Apple shares rose in the premarket. Bloomberg reported Wednesday evening that Apple plans to increase new iPhone production by 20% for 2021. JPMorgan has also added the tech giant to its focus list. The company has raised its price target for Apple and believes the stock can gain 20% over the next 12 months.
The Dow fell 107 points, or 0.3%, on Tuesday and fell from a record high near 35,000 on Monday. The S&P and Nasdaq Composite hit intraday all-time highs on Tuesday, then gave up those gains and ended up closing lower. The S&P 500 was down 0.35% while the Nasdaq Composite was down 0.38%, each posting their first negative session of three.
The decline came after the Labor Department said inflation rose at the fastest rate it had in nearly 13 years over the past month. According to the economists surveyed by Dow Jones, the consumer price index rose 5.4% year-on-year, exceeding expectations of a 5% increase. However, since a significant portion of the overall increase was due to a surge in used car prices, some were quick to say that inflation is likely to be temporary.
In the middle of a bearish day on Wall Street, the S&P 500 tech sector bucked the negative trend and closed at a new all-time high. The 10 other S&P sectors fell, with real estate leading the losses.
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The hot inflation report overshadowed the strong earnings reports for the second quarter. JPMorgan and Goldman Sachs opened earnings season Tuesday, with both banks beating sales and earnings estimates. PepsiCo also beat estimates.
The big averages are still hovering around their all-time highs, and Wall Street strategists are optimistic about what the second half of 2021 will bring as the economy continues to recover from Covid-19.
"After a 2020 that we will never forget, we are optimistic about the second half of 2021 and even 2022," said Burt White, LPL Managing Director and Chief Investment Officer. "We believe we are at the beginning of the economic cycle and that the next recession may be years away."
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