US stocks rise ahead of Powell’s second day of remarks


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US stocks rose slightly on Wednesday, managing to stabilise after new record highs before hearing more comments from Federal Reserve Chairman Jerome Powell.

Both the S&P 500 and the Nasdaq Composite made new all-time highs on Tuesday, even though their pace of gains appeared to slow considerably. Gains were also largely driven by technology stocks, amid lingering excitement about artificial intelligence.

Powell returns to the stage

Federal Reserve Chairman Jerome Powell’s testimony prompted markets to largely maintain their expectations of a September rate cut, even though Powell did not appear to have telegraphed outright a cut.

Speaking before the Senate Banking Committee, Powell said that the US economy had cooled in recent months, and that it was also making progress towards the Fed’s 2% inflation target.

Powell acknowledged that too much cooling in the labour market posed another danger to the economy, and that keeping interest rates too high for a longer period of time could create further headwinds for the economy.

However, the Fed chairman did not give any direct signals regarding the timing of possible interest rate cuts, and reaffirmed that any future decisions would continue to depend on upcoming economic data. He also reiterated the Fed’s commitment to meet its 2% inflation target. Powell is scheduled to testify before the House of Representatives on Wednesday.

The Fed Chairman’s comments caused market participants to largely hold off bets for a September rate cut, with CME Fedwatch pointing to a greater than 72% chance of a 25 basis point cut during the month.

Powell’s comments also put the spotlight on upcoming consumer price index inflation data, due on Thursday.

Microsoft steps down from Open AI board seat

In the corporate sector, several major Wall Street banks will release their results on Friday, while PepsiCov (PEP) and Delta Air Lines (DAL) will also release their results before the weekend.

Additionally, Microsoft (MSFT) is likely to be in the spotlight after the software giant is stepping down as an observer on the OpenAI board amid increased regulatory scrutiny over generative AI in both Europe and the US.

Keith Dolliver, Microsoft’s deputy general counsel, wrote to OpenAI on Tuesday, stating that while the observer position provided valuable insight into the board’s activities without jeopardising its independence, it was no longer necessary, given that Microsoft had “witnessed considerable progress by the newly formed board”.

Crude oil loses ground on poor Chinese data

Crude oil prices declined on Wednesday, adding to the previous session’s losses, as weak Chinese inflation data heightened concerns about the health of the world’s second-largest economy. Uncertainty over deflation in China, the world’s biggest crude importer, weighed on the oil market on Wednesday, although a larger-than-expected drawdown in US inventories limited losses. Data from the American Petroleum Institute, released on Tuesday, revealed that US crude inventories fell by 1.9 million barrels the previous week, at the height of the summer driving season.

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