Powell's Testimony Fuels Market Expectations

On Tuesday evening (July 9), U.S. stock index futures stabilized in narrow fluctuations. The market's expectation for a rate cut pushed Wall Street to new highs, although the pace of gains slowed. Despite Federal Reserve Chairman Powell not directly hinting at a rate cut in his testimony, the market broadly anticipates a rate cut by the Fed in September. Powell will continue his testimony before Congress on Wednesday.

As of 7:12 PM Eastern Time (11:12 PM GMT), S&P 500 futures edged up to 5634.50 points, Nasdaq 100 futures rose 0.1% to 20701.25 points, and Dow Jones futures remained unchanged at 39592.0 points.

Risks of Economic Slowdown Persist

In his testimony before the Senate Banking Committee, Powell acknowledged that the U.S. economy has cooled recently but is still moving towards the Fed's 2% inflation target. He pointed out that excessive cooling in the labor market could pose a threat to the economy, and maintaining high interest rates for a prolonged period could also bring additional resistance.

Nevertheless, Powell did not suggest any potential timing for a rate cut, emphasizing that future decisions will be based on upcoming economic data. He reiterated the Fed's commitment to achieving the 2% inflation target.

Following Powell's remarks, traders mostly maintained their expectations for a September rate cut. CME Fedwatch data shows that the market's expectation for a 25 basis point rate cut in September exceeds 72%.

Powell's comments also shifted market focus to the Consumer Price Index (CPI) inflation data set to be released on Thursday.

Wall Street Climbs to Record Highs

On Tuesday, both the S&P 500 and Nasdaq Composite indices reached new record highs, though the gains moderated. Despite ongoing enthusiasm for artificial intelligence, the rise in high-tech giant stocks accounted for much of the upward movement.

On the day, the S&P 500 index rose 0.1% to 5576.98 points, the Nasdaq Composite index climbed 0.2% to 18430.56 points, while the Dow Jones Industrial Average fell 0.1% to 39291.97 points.

Apart from Thursday's CPI data, the market will also be watching the start of the second-quarter earnings season, with several major Wall Street banks set to report their results on Friday.