Nasdaq 100, Dow Jones, S&P 500 News: Powell Cautious as Tesla Leads Consumer Discretionary Sector Higher

U.S. Stocks Waver as Powell Reaffirms Cautious Rate Cut Stance

U.S. stock indexes struggled for direction on Tuesday as Federal Reserve Chair Jerome Powell reiterated the central bank’s cautious approach to interest rate cuts. The S&P 500 saw mixed performance, with Tesla shares surging while Nvidia declined. Trading volume is expected to be muted this week due to the upcoming Independence Day holiday.

At 16:54, the Dow is trading 39101.84, down 67.68 or -0.17%. The S&P 500 Index is at 5479.97, up 4.88 or +0.09% and the Nasdaq 100 is trading 17928.55, up 49.25 or +0.28%.

Fed Chair Powell Emphasizes Inflation Progress, but Urges Patience

Speaking at a central banking forum in Portugal, Powell acknowledged significant progress in bringing inflation down towards the Fed’s 2% target. However, he stressed the need for more evidence before initiating rate cuts, stating, “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”

Powell’s comments come as the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose at a 2.6% 12-month pace in May, down from around 4% a year ago. Despite this improvement, the Fed does not expect inflation to reach its 2% goal until 2026.

Market Expectations Adjust to Fed’s Stance

Market expectations for rate cuts have shifted dramatically since earlier this year. Current pricing suggests two quarter-point reductions in 2024, down from previous expectations of six cuts. The Fed’s own projections indicate just one cut this year, highlighting the gap between market hopes and central bank guidance.

Job Market Remains Robust

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) revealed stronger-than-expected employment opportunities in May. Job openings increased to 8.14 million, surpassing the 7.9 million forecast. The ratio of openings to unemployed workers stood at 1.2 to 1, indicating continued labor market tightness.

Sector and Stock Performance

The consumer discretionary sector led gains, rising 1.17%, buoyed by Tesla’s strong performance. Tesla shares jumped nearly 9% after reporting better-than-expected second-quarter deliveries of 443,956 vehicles.

Technology stocks faced pressure, with the sector slightly down by 0.02%. Nvidia shares fell roughly 2% as investors questioned the sustainability of its recent rally. The stock has surged about 146% year-to-date.

The healthcare sector underperformed, dropping 0.72%. Eli Lilly and Novo Nordisk both shed about 2% following criticism from President Biden and Senator Bernie Sanders over drug pricing.

Energy stocks also declined, with the sector down 0.33% as oil prices retreated.

Notable Stock Movements

• Paramount Global rose 3% on reports of potential streaming service merger talks.
• Pure Storage tumbled 5.4% following a UBS downgrade to sell.
• Crowdstrike Holdings fell 2% after a Piper Sandler downgrade to neutral.
• PayPal advanced 1.8% on an upgrade by Susquehanna to positive.

Market Forecast

The mixed signals from the Fed and strong job market data suggest a cautiously bullish outlook for U.S. stocks in the near term. While the Fed’s stance may temper enthusiasm, robust employment and gradual progress on inflation could support market stability.

The consumer discretionary and technology sectors may continue to see divergent performance, with individual stock stories driving moves. Investors should closely monitor upcoming economic data, particularly Friday’s jobs report, for further clues on the Fed’s path forward.

As we approach earnings season, company-specific factors are likely to play an increasingly important role in market movements. Traders should remain vigilant for any shifts in economic data or Fed commentary that could impact this delicate balance between growth concerns and inflation expectations.

Technical Analysis

E-mini S&P 500 Index futures are searching for direction at the mid-session on Tuesday. On the daily chart, a trade through 5588.00 will signal a resumption of the uptrend, while a sustained move through 5502.75 could lead to significant damage. This leads us to believe that the way of least resistance is down.