Nasdaq Index, Dow Jones, S&P 500 News: Powell’s Congressional Testimony to Shape Market Expectations

US Markets at Record Highs as Investors Eye Inflation Data

US stock futures edged higher on Tuesday, following record closes for the S&P 500 and Nasdaq Composite. The S&P 500 has reached 35 record closing highs in 2024, while the Nasdaq Composite has notched 25.

At 11:08 GMT, Dow Futures are trading 39696.00, up 46.00 or +0.12%. S&P 500 Index Futures are at 5638.25, up 13.00 or +0.23% and Nasdaq 100 Index Futures are trading 20739.25, up 79.50 or +0.38%.

Market Performance

The continued upward trend reflects investor optimism about easing inflation and potential monetary policy shifts. However, some analysts caution that a summer correction may be on the horizon.

Fed Watch and Powell’s Testimony

Federal Reserve Chair Jerome Powell is set to testify before Congress this week, providing his semiannual update on monetary policy. Powell will address the Senate Banking Committee on Tuesday, followed by an appearance before the House Financial Services Committee on Wednesday. Investors will closely monitor his remarks for insights into the Fed’s economic outlook and policy direction.

The testimony comes at a critical juncture, with markets seeking clarity on the Fed’s stance amid conflicting economic signals. Powell’s words will be scrutinized for any hints about the timing and pace of potential interest rate cuts. His assessment of inflation trends, labor market conditions, and overall economic growth will be particularly significant in shaping market expectations.

Several other Fed officials are also scheduled to speak throughout the week, potentially offering additional perspectives on monetary policy.

Inflation Data on Deck

Key inflation reports are due later this week, with the Consumer Price Index (CPI) scheduled for Thursday and the Producer Price Index (PPI) on Friday. These data points are crucial as the Fed has emphasized the need for clear evidence of easing inflation before considering interest rate cuts.

Rate Cut Expectations

CME Group’s FedWatch tool indicates traders are pricing in a 77% chance of a rate cut in September. However, rates are expected to remain unchanged at the Fed’s upcoming meeting this month.

Earnings Season Kicks Off

Investors are also gearing up for the Q2 earnings season, with notable reports coming from PepsiCo and Delta Air Lines on Thursday, followed by major banks Citigroup and JPMorgan Chase on Friday.

Market Forecast

While the short-term outlook appears bullish, caution is warranted. Adam Crisafulli of Vital Knowledge warns that investors may be overestimating the impact of potential rate cuts on stocks. He notes, “A modest easing cycle, as the approaching one will likely be, won’t be enough to immediately halt the growth slowdown presently underway.”

Given the mixed signals and upcoming economic data, traders should remain vigilant and consider diversifying their portfolios to mitigate potential risks in the evolving market landscape.

Technical Analysis

E-mini S&P 500 Index futures are testing a new all-time high shortly before the cash market opening on Tuesday. The “Trend is Your Friend” traders aren’t too worried at this time, but other traders are becoming concerned about valuations.

The quick way to determine valuation is by comparison to the 50-day and 200-day moving averages. The index is beginning to pullaway from the 50-day moving average at 5409.39 and this is creating worries for even the strongest bulls. So they are predicting a pullback in stocks in order to adjust what they perceive is a grossly overbought market.

A closing price reversal top today and a subsequent follow-through to the downside would be one of the strongest signs that the selling is greater than the buying at current price levels.