Stocks were mixed Tuesday as Federal Reserve Chair Jerome Powell signaled that interest rates need to remain higher-for-longer. The Dow Jones Industrial Average climbed over 60 points, while the S&P 500 Index and Nasdaq Composite slipped 0.2% and 0.1%, respectively.
Here's how the market settled on Tuesday:
S&P 500 Index (NYSE: SPY): -0.21% or -10.44 points to 5,051.42
Dow Jones Industrial Average (NYSE: DIA): +0.17% or +63.66 points to 47,798.77
Nasdaq Composite Index (NASDAQ: QQQ): -0.12% or -19.77 points to 15,865.25
Zoom In:
Powell said Tuesday that the U.S. economy has not seen improvement towards the central bank's goal for inflation despite its strength, signaling that interest rates may need to remain higher-for-longer to support growth long-term.
"More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal," Powell said during a policy forum on U.S.-Canada economic relations.
The Fed has mained its benchmark rate target range between 5.25% to 5.50% since July, its highest level in over two decades following 11 consecutive rate increases that began in March 2022.
"The recent data have clearly not given us greater confidence, and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell added. "That said, we think policy is well positioned to handle the risks that we face."
Meanwhile, Fed Governor Philip Jefferson said Tuesday that he expects inflation to continue to ease in response to the central bank's restrictive policy.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said in a discussion panel. "Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect is to be, it will be appropriate to hold in place the current restrictive stance of policy for longer."
In Economic News:
U.S. housing starts and building permits came in below expectations in March, the Commerce Department reported Tuesday. New construction of privately owned homes totaled a seasonally adjusted 1.32 million for the month, decreasing by 14.7% from February and a 4.3% year-over-year. Meanwhile, permits declined by 4.3% month-to-month to 1.46 million.
On the Earnings Front:
UnitedHealth Group (NYSE: UHG) reported better-than-expected first-quarter earnings on Tuesday, offering an encouraging sign that the insurance company is recovering well after the cyberattack on its subsidiary Change Healthcare. The company said the total impact of the cyberattack in the first quarter was $0.74 per share and expects full-year impact to be between $1.15 and $1.35 per share.
Morgan Stanley (NYSE: MS) also reported strong first-quarter earnings on Tuesday, driven by better-than-expected wealth management, trading and investment banking revenues, echoing similar results from peers like JPMorgan (NYSE: JPM) and Citigroup (NYSE: C). Bank of America (NYSE: BAC) also saw similar trends in its first quarter, as well as strong interest income and investment banking revenues.
Johnson & Johnson (NYSE: JNJ) also delivered better-than-expected first-quarter results on Tuesday, with its medical devices unit's sales topping expectations. However, J&J narrowed its full-year guidance, with sales expected to be between $88 billion to $88.4 billion, down from a previous forecast of $87.8 billion to $88.6 billion. The company's adjusted earnings was also changed to now be a range of $10.57 to $10.72 per share.
For Wednesday:
Investors will respond to the release of the Fed Beige Book, as well as earnings reports from companies including United Airlines (NASDAQ: UAL), ASML Holding (NASDAQ: ASML), U.S. Bancorp (NYSE: USB), and The Travelers Companies (NYSE: TRV).