By Investors Hub
The major U.S. index futures are once again pointing to a roughly flat opening on Wednesday, with stocks likely to show a lack of direction after moving higher over the course of the previous session.
Traders may stick to the sidelines ahead of Federal Reserve Chairman Jerome Powell?s second day of testimony on Capitol Hill, with the central bank chief appearing before the House Financial Services Committee.
A positive reaction to Powell?s testimony before the Senate Banking Committee on Tuesday contributed to strength on Wall Street, as he offered an upbeat assessment of the U.S. economy.
Nonetheless, some negative sentiment may be generated in reaction to a report from the Commerce Department showing a sharp pullback in new residential construction in the U.S. in the month of June.
Stocks moved mostly higher over the course of the trading day on Tuesday after recovering from an initial move to the upside. With the gains on the day, the Nasdaq set a new record closing high and the S&P 500 reached its best closing level in well over five months.
The major averages pulled back off their highs going into the close but remained in positive territory. The Dow rose 55.53 points or 0.2 percent to 25,119.89, the Nasdaq advanced 49.40 points or 0.6 percent to 7,855.12 and the S&P 500 climbed 11.12 points or 0.4 percent to 2,809.55.
The strength that emerged on Wall Street came as Federal Reserve Chairman Jerome Powell offered few surprises in his semiannual monetary policy testimony before the Senate Banking Committee.
In his prepared remarks, Powell said the U.S. economy has grown at a solid pace so far this year and noted the latest data suggests economic growth in the second quarter was “considerably stronger” than in the first quarter.
The Fed chief also described recent inflation data as “encouraging,” with consumer price inflation a little above the central bank’s 2 percent target.
“Looking ahead, my colleagues on the FOMC and I expect that, with appropriate monetary policy, the job market will remain strong and inflation will stay near 2 percent over the next several years,” Powell said.
With the strong job market, inflation close to the objective, and the risks to the outlook roughly balanced, Powell reiterated that the Fed believes gradually raising interest rates is “the best way forward.”
“We are aware that, on the one hand, raising interest rates too slowly may lead to high inflation or financial market excesses,” Powell said. “On the other hand, if we raise rates too rapidly, the economy could weaken and inflation could run persistently below our objective.”
Powell said the Fed will continue to weigh a wide range of relevant information and stressed that the central bank’s policy decisions will depend on the economic outlook.
The Fed has raised rates twice this year to the current range of 1.75 to 2 percent and has signaled two more rate hikes before the end of the year.
On the U.S. economic front, the Fed released a report before the start of trading showing industrial production increased in line with economist estimates in June amid a rebound in auto production.
The report said industrial production climbed by 0.6 percent in June after falling by a downwardly revised 0.5 percent in May.
A separate report from the National Association of Home Builders showed homebuilder confidence has held steady in the month of July.
The report said the NAHB/Wells Fargo Housing Market Index remained unchanged in July after dipping to 68 in June. The unchanged reading matched economist estimates.
Chemical stocks showed a strong move to the upside over the course of the trading session, driving the S&P Chemical Sector Index up by 1.5 percent.
Significant strength was also visible among steel stocks, as reflected by the 1.5 percent advance by the NYSE Arca Steel Index.
Housing stocks also turned in a strong performance following the NAHB report, with the Philadelphia Oil Service Index climbing by 1.4 percent.
Semiconductor, brokerage, and biotechnology stocks also moved notably higher on the day, while oil service and real estate stocks moved to the downside.
