Federal Reserve Chairman Jerome Powell’s second day of testimony before Congress has maintained market optimism, with US stock indices reaching new highs. The S&P 500 and Nasdaq Composite both set new records, with the S&P 500 rising for the seventh consecutive day. Powell’s comments on a significant cooling of labor market conditions compared to two years ago, and his assertion that the labor market appears to be fully back in balance, have bolstered investor confidence.Powell reiterated that ‘more good data would strengthen our confidence’ in inflation being sustainably under control, hinting at the possibility of interest rate cuts later this year. This has led to increased speculation about potential rate cuts, with many analysts predicting the first cut in September.Markets are now eagerly awaiting the release of June’s Consumer Price Index (CPI) data, scheduled for Thursday. Economists expect the annual rate of consumer price growth to slow to 3.1% in June, down from 3.3% in May. This data will be crucial in shaping the Fed’s future monetary policy decisions.The dollar has weakened against emerging market currencies, particularly following lower-than-expected inflation data in Brazil. The Brazilian IPCA inflation rate for June came in at 0.21%, below market expectations, leading to a decline in the dollar against the Brazilian real.In the technology sector, chipmakers like Nvidia and Micron have seen gains of up to 2% after positive quarterly earnings reports from Taiwan-based chipmakers, driven by the boom in artificial intelligence technology.
Key points
- Powell’s testimony suggests a cooling labor market, potentially paving the way for interest rate cuts.
- US stock indices, including S&P 500 and Nasdaq, reach new record highs.
- Markets await crucial June CPI data, expected to show slowing inflation.
- Brazil’s lower-than-expected inflation weakens the dollar against emerging market currencies.
