The S&P 500 climbed to a fresh record Tuesday after Federal Reserve Chair Jerome Powell warned about the dangers of keeping interest rates high for too long.
The broad market index inched higher by 0.07% to 5,576.98 for its 36th record close of the year. The Nasdaq Composite added 0.14% to close at 18,429.29, also ending the day at a record. Both indexes touched fresh all-time highs during the session. The Dow Jones Industrial Average ticked down 52.82 points, or 0.13%, and ended at 39,291.97.
Powell said keeping interest rates elevated for too long could risk further economic growth, seemingly hinting that the central bank is considering taking a less restrictive stance.
“Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell said as part of his semiannual update on monetary policy. “More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”
Powell will continue testimony this week before Congress on Wednesday before the House Financial Services Committee. His remarks come ahead of key inflation data arriving later this week, with the June consumer price index due on Thursday and the producer price index on Friday.
“The labor market has been weakening and Powell is starting to pay attention,” said David Russell, global head of market strategy at TradeStation. “He recognizes that policy is restrictive and progress has been made on inflation. This potentially lays the groundwork for a ‘Powell put’ later in the year.”
Nvidia shares were up 2.5% after KeyBanc hiked its price target on the chipmaker to $180, implying upside of 40% from Monday’s close.
A lack of market breadth kept the S&P 500’s gains in check, however. Shares of McDonald’s and Microsoft slipped 0.8% and 1.4%, respectively.
“The S&P 500 has been driven by a narrow range of tech leaders leveraged to AI tailwinds, while the rest of the market has significantly lagged,” Pernas Research co-founder Deiya Pernas said of the S&P 500’s fresh record high. “Given the exuberance around AI, we expect this trend to continue in the near to intermediate term.”
— CNBC’s Jeff Cox contributed to this report.
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