Wall Street ends higher as Powell ends testimony

June 22 (Reuters) – The S&P 500 and Nasdaq closed higher on Thursday as U.S. Federal Reserve Chairman Jerome Powell continued to beat the hawkish drum, suggesting the central bank has not reached the end of its tightening cycle but giving assurances the Fed would proceed with caution.

The tech-heavy Nasdaq’s robust gains were boosted by momentum stocks led by Amazon.com ( AMZN.O ) Apple Inc ( AAPL.O ) and Microsoft Corp ( MSFT.O ), while gains for the S&P 500 were more modest.

Industrials (.SPLRCI) and financials (.SPSY) kept the blue-chip Dow largely flat.

“Investors are playing a tug-of-war, like pulling petals from a daisy that says ‘bull market, not a bull market,'” said Sam Stovall, investment strategist at CFRA Research in New York. “We don’t have much to act on, second quarter earnings don’t start for a couple of weeks yet.”

Powell, appearing before the Senate Banking Committee for his semiannual testimony on monetary policy, reiterated his view that more rate hikes are likely in the months ahead, a sentiment echoed by Fed Governor Michelle Bowman earlier in the session.

“The market believes the Fed will raise rates one more time, not two more times as suggested by the FOMC meeting summary,” Stovall added. “Additionally, yesterday and today, Powell reiterated that they will be data-dependent and Wall Street expects inflation to cool faster, and unemployment to start creeping higher, which is what the Fed has meant by its rate hikes.”

Investors were surprised when the Bank of England implemented a bigger-than-expected 50 basis point rate hike to tackle Britain’s stubborn inflation, further evidence that high price growth remains a global economic headwind.

At last glance, financial markets have priced in a 77% probability of another 25 basis points by the end of the Fed’s July meeting, according to CME’s FedWatch tool.

On the economic front, jobless claims remained at a 20-month high and the Conference Board’s leading economic index posted its 14th straight monthly decline, suggesting the Fed’s efforts to curb the economy are starting to have their intended effect.

The Dow Jones Industrial Average (.DJI) fell 4.81 points, or 0.01%, to 33,946.71, the S&P 500 (.SPX) gained 16.2 points, or 0.37%, to 4,381.89 and The Nasdaq Composite (.284 points, .IXIC. 0.95% to 13,630.61.

Of the 11 major sectors in the S&P 500, five ended the session higher, with consumer discretionary (.SPLRCD) posting the biggest percentage gain.

Real estate (.SPLRCR) and energy (.SPNY) had the biggest declines.

Spirit AeroSystems ( SPR.N ) fell 9.4% after the aircraft parts supplier announced it would halt production at its Wichita, Kansas plant after workers announced a strike starting June 24.

Boeing ( BA.N ) shares fell 3.1 percent.

US-listed Accenture shares fell 1.9% after the IT consultancy forecast weaker-than-expected fourth-quarter earnings.

Olive Garden parent Darden Restaurants ( DRI.N ) gave a disappointing annual earnings outlook due to high commodity prices. The share fell 2.6 percent.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 2.17 to 1; on the Nasdaq a 1.62 to 1 ratio favored decliners.

S&P 500 posted 16 new 52-week highs and 5 new lows; The Nasdaq Composite recorded 55 new highs and 118 new lows.

Volume on US exchanges was 9.60 billion shares, compared to the 11.37 billion average for the full session over the past 20 trading days.

Reporting by Stephen Culp; Additional reporting by Shubham Batra, Shristi Achar A and Medha Singh in Bengaluru; Editing by Aurora Ellis

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