Stocks Extend Yesterday’s Rally as Fed Chief Holds the Dovish Line…..

U.S. stocks extended yesterday’s rally, moving the markets back to record high territory. Fed Chairman Jerome Powell’s Congressional testimony was in focus and he reiterated that the labor market has a long way to recover and that recent elevated inflation figures should be transitory. Powell’s comments followed last week’s monetary policy decision which roiled the markets as the Fed boosted its economic and inflation forecasts and brought forward the outlook for the first rate lift off. Treasuries were higher following Powell’s comments to apply some downside pressure on yields and as existing home sales declined for a fourth straight month and regional manufacturing growth unexpectedly accelerated. The U.S. dollar modestly added to yesterday’s drop, trimming some of last week’s noticeable move higher. Gold and crude oil prices were lower. Delta Air Lines offered some upbeat guidance on the return of pre-pandemic U.S. leisure travel levels, while Sanderson Farms rallied on a Wall Street Journal report that it is exploring a sale. Asia finished mostly higher and Europe traded mixed.

The Dow Jones Industrial Average rose 69 points (0.2%) to 33,946, the S&P 500 Index increased 22 points (0.5%) to 4,246, and the Nasdaq Composite increased 112 points (0.8%) to 14,253. In moderate volume, 920 million shares were traded on the NYSE and 4.3 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.27 to $72.85 per barrel. Elsewhere, the Bloomberg gold spot price decreased $6.86 to $1,776.41 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—dipped 0.2% to 91.70.

The Richmond Fed Manufacturing Activity Index unexpectedly moved further into expansion territory (a reading above zero) for this month. The index edged higher to 22 from May’s 18 reading, where it was forecasted to remain. Growth in new orders accelerated solidly, along with wages, while growth in employment, order backlog, and shipments all decelerated. Prices paid changed little but remained elevated.

Treasuries were higher, with the yields on the 2-year and 10-year notes, along with the 30-year bond, decreasing 2 basis points (bps) to 0.23%, 1.47% and 2.10% respectively.

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