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The S&P 500 and Nasdaq both hit record highs as Powell hints at a rate cut.

TraderKnows
TraderKnows
07-10

Recently, Federal Reserve Chairman Jerome Powell hinted that better economic data will increase the possibility of a rate cut, and on Tuesday both the S&P 500 and the Nasdaq indices reached record highs.

On Tuesday, both the S&P 500 and the Nasdaq indices reached record highs, spurred by an increase in Nvidia's stock. This came after Federal Reserve Chairman Jerome Powell informed lawmakers that more favorable economic data would enhance the likelihood of interest rate cuts.

Artificial intelligence chipmaker Nvidia rose by 2.5%, offsetting declines in other chip stocks.

Microsoft fell by 1.4%, while Tesla surged by 3.7%, bringing its 2024 gains to 5%.

This marks the sixth consecutive record high for the Nasdaq and the fifth for the S&P 500, as optimism about the development of artificial intelligence among U.S. companies counterbalanced uncertainties surrounding the Federal Reserve's interest rate cut trajectory.

Testifying before Congress, Powell stated that although inflation remains "above" the soft-landing target of 2%, it has improved in recent months, and "more favorable data would strengthen" the case for rate cuts.

However, Powell insisted that he was not "signaling any timing on future actions."

According to the CME's FedWatch tool, the market expects a 50 basis point cut this year and considers the likelihood of a 25 basis point cut at the Fed's September meeting to be close to 72%. A month ago, this probability was less than 50%.

Bill Norcie, Senior Investment Director at Bank of America Wealth Management, stated: "In 2024, the U.S. economy, especially the labor market, has shown remarkable resilience. Our baseline expectation is that a recession is not the most likely outcome; instead, we should continue to anticipate moderate growth for the remainder of this year and the next."

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Economic Recovery

Economic recovery refers to the phase where, following an economic downturn or crisis, there's a gradual increase in production and employment, businesses see improved profits, and consumer and investment activities rebound, leading to a gradual return to a normal economic state.

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