Wall Street ends higher as Powell wraps up testimony

There was lots of uncertainty on display in the market today as the Dow zigzagged back and forth several times between 50-point gains and hundred-point losses until finally closing near break-even.  The S&P fared slightly better and the Nasdaq much better due to gains from Amazon, Apple, and Microsoft.  The crux of the mixed messages lay with Powell’s final day remarks before the Congress as he continued to be hawkish insisting on more rate hikes to meet the inflation target. 

But investors took reassurance from his more qualifying remarks that hikes would be “data dependent” and the market still bets on just one more hike as inflation data will show faster cooling that the Fed expects. The odds of a ¼ point hike in July are now at 77%.  As today’s expert sums it up, “Investors are playing tug of war, as if they’re pulling petals from a daisy saying ‘bull market, no bull market.’”  It was also encouraging that jobless claims held steady.  Volume was quite light at 9.6 billion. 

Wall Street ends higher as Powell wraps up testimony

By Stephen Culp

June 22, 2023 4:36 PM

DJ: 33,951.52  -102.35        NAS: 13,502.20  -165.09        S&P: 4,365.69  -23.02      6/21

DJ: 33,946.71  -4.81            NAS: 13,630.61  +128.41       S&P: 4,381.89  +16.20     6/22

June 22 (Reuters) - The S&P 500 and the Nasdaq closed higher on Thursday as U.S. Federal Reserve Chairman Jerome Powell continued to beat a hawkish drum and suggested the central bank has not reached the end of its tightening cycle, but provided reassurance that the Fed would proceed with caution.  The tech-heavy Nasdaq's robust gain got a boost from momentum stocks led by Amazon.com (AMZN.O) Apple Inc (AAPL.O), and Microsoft Corp (MSFT.O), while the S&P 500's advance was more modest.  Industrials (.SPLRCI) and financials (.SPSY) held the blue-chip Dow essentially flat.

"Investors are playing tug of war, as if they're pulling petals from a daisy saying 'bull market, not a bull market,'" said Sam Stovall, chief investment strategist of CFRA Research in New York. "We don’t have much to trade on, second-quarter earnings don’t start in a couple weeks yet."  Powell, appearing before the Senate Banking Committee for his semi-annual monetary policy testimony reiterated his view that more interest rate hikes are likely in the months ahead, a sentiment echoed by Fed Governor Michelle Bowman earlier in the session.  "The market believes the Fed will raise rates one more time, not two more times as implied by the post FOMC meeting summary," Stovall added. "In addition, yesterday and today’s, Powell reiterated that they will be data dependent and Wall Street expects inflation to cool faster, and unemployment will start to creep higher which is what the Fed has intended with its rate increases."  Investors were taken by surprise when the Bank of England implemented a larger-than-expected 50 basis point rate hike to tackle Britain's stubborn inflation, further evidence that hot price growth remains a global economic headwind.  At last glance, financial markets have priced in a 77% probability of another 25 basis point rate hike at the conclusion of the Fed's July meeting, according to CME's FedWatch tool.

On the economic front, jobless claims held steady at a 20-month high and the Conference Board's Leading Economic index posted its 14th consecutive monthly decline, suggesting that the Fed's efforts to dampen the economy are beginning to have their intended effect.

The Dow Jones Industrial Average (.DJI) fell 4.81 points, or 0.01%, to 33,946.71, the S&P 500 (.SPX) gained 16.2 points, or 0.37%, to 4,381.89 and the Nasdaq Composite (.IXIC) added 128.41 points, or 0.95%, to 13,630.61.  Of the 11 major sectors of the S&P 500, five ended the session higher, with consumer discretionary (.SPLRCD) enjoying the largest percentage advance.  Real estate (.SPLRCR) and energy (.SPNY) posted the biggest declines.

Spirit AeroSystems (SPR.N) tumbled 9.4% after the aircraft parts supplier announced it would suspend production at its plant in Wichita, Kansas, after workers announced a strike from June 24.  Boeing (BA.N) shares dropped 3.1%.  U.S.-listed shares of Accenture fell 1.9% after the IT consulting firm forecast weaker-than-expected fourth-quarter revenue.  Olive Garden parent Darden Restaurants (DRI.N) issued a disappointing annual profit outlook due to ballooning commodities prices. Its shares slid 2.6%.

Declining issues outnumbered advancing ones on the NYSE by a 2.17-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored decliners.  The S&P 500 posted 16 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 55 new highs and 118 new lows.

Volume on U.S. exchanges was 9.60 billion shares, compared with the 11.37 billion average for the full session over the last 20 trading days.