U.S. stock indexes were higher, edging near record territory Wednesday, as Federal Reserve Chairman Jerome Powell kicked off two days of testimony where a sharp rise in inflation has been a key focus.
The Fed chief said that the labor market, although improving, has a long way to go toward recovering from the pandemic, despite recent record high job openings.
Investors also weighed another batch of quarterly results from the nation’s largest financial institutions and a reading of the June producer-price index, which jumped 1% last month.
How are stock benchmarks trading?
-
The Dow Jones Industrial Average
DJIA,
+0.13%
was up 17 points, near 34,907, after briefly turning negative. -
S&P 500 index
SPX,
+0.20%
traded up 6 points, or 0.2%, near 4,375, after carving out a fresh intraday all-time high at 4,393.68 near the start of the session. -
The Nasdaq Composite Index
COMP,
-0.02%
was up 11 points, or 0.1%, near 14,688, after trading above its July 12 closing high at 14,733.24.
On Tuesday, the Dow fell 107.39 points, or 0.3%, to end at 34,888.79; the S&P 500 index declined 15.42 points, or 0.4%, to close at 4,369.21, and the Nasdaq Composite fell 55.59 points, or 0.4%, finishing at 14,677.65. The small-capitalization Russell 2000 index
RUT,
dropped 1.9%.
What’s driving the market?
All eyes were on Fed Chair Powell Wednesday, in his first of two days of testimony before Congress about the state of the economy, easy monetary policies, skyrocketing U.S. home prices and the climbing cost of living.
Powell said low interest rates and a lack of supply contributed to the housing affordability crisis, but also stressed that fortunately the “reckless” and “irresponsible lending” practices that proliferated in run up to the 2008 financial crisis “are not happening, at least so far.”
The Fed chief also said rising house prices underscored the “uneven” nature of the U.S. economic recovery, while stressing that further improvements in the labor market would be needed for the central bank to start tightening monetary policy.
Inflation worries were back in focus Wednesday after the June producer-price index came in hotter than expected, confirming that inflation is on the rise as the economy attempts to bounce back from the COVID pandemic. The PPI jumped 1% last month compared to analysts forecasts for a 0.6% rise. The pace of wholesale inflation over the past 12 months moved up to 7.3% from 6.6% in May.
The PPI data followed higher consumer price inflation data on Tuesday which showed prices rose 5.4% in the year to June, the highest rate since 2008, when oil hit a record $150 a barrel.
The central bank chief told the House Financial Services Committee Wednesday, in his semiannual update to lawmakers, that he was closely monitoring the current hot pace of inflation and that “we would absolutely change our policy,” if rising costs uprooted his expectations.
On the labor market, Powell said that “while reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue,” while also stressing that discussions will remain ongoing in the coming months about a potential pathway to eventually tapering the Fed’s asset-purchase program, currently running at $120 billion a month.
So far, most Fed members have not been flustered by the jump in inflation, with most officials, like Powell, describing it as likely short-lived.
On Tuesday San Francisco Fed President Mary Daly characterized the CPI print as just part of a temporary “pop” in inflation that won’t last, and the central bank should remain “steady in the boat” with its easy policy stance.
Corporate earnings were also in focus on Wednesday with BlackRock
BLK,
and Bank of America
BAC,
reporting revenue and profit that were better than forecast.
Also in Washington, Senate Democrats announced late Tuesday said that they’d reached a budget agreement envisioning spending a $3.5 trillion over the coming decade, paving the way for their drive to pour federal resources into climate change, healthcare, and family-service programs sought by President Joe Biden.
Separately Tuesday, a bipartisan group of senators continued working on a third measure that would spend around $1 trillion on roads, water systems and other infrastructure projects, another Biden priority.
Which companies are in focus?
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Shares of Bank of America Corp.
BAC,
-3.12%
dropped 3.5% Wednesday, after the moneycenter bank reported a second-quarter profit that rose above expectations but revenue fell short, weighed by misses in the consumer banking and global markets businesses. -
BlackRock Inc.
BLK,
-3.05%
reported Wednesday second-quarter profit and revenue that rose above expectations, as assets under management increased 30% and net inflows topped $80 billion. - Eli Lilly & Co. LLY said Wednesday it is acquiring the shares of Protomer Technologies it doesn’t already own, in a deal it says has a potential value of more than $1 billion based on future development and commercial milestones.
- Towards Corp. VRS, a specialty and packaging paper and pulp company, on Wednesday confirmed that it has received an unsolicited bid from Atlas Holdings LLC to take over the company for $20 a share in cash.
- Sight Sciences Inc. SGHT, is now set to go public at a valuation of more than $1 billion, after the expected pricing and number of shares to be offered in the California-based Ophthalmology and optometry company’s initial public offering were increased.
How are other assets faring?
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The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.356%
fell 7 basis points to 1.36%. -
The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was down 0.4%.
-
Oil futures traded modestly lower, with the U.S. benchmark CL00 off 2.9% at $73.05 a barrel. Gold futures GC00 jumped, advancing 0.7% to $1,822 an ounce.
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In European equities, the Stoxx 600 Europe SXXP closed 0.1% lower. London’s FTSE 100 UKX retreated 0.5%.
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In Asia, the Hang Seng Index HSI gave up 0.6% in Hong Kong, while the Shanghai Composite SHCOMP fell 1.1% and Japan’s Nikkei 225 NIK closed 0.4% lower.