By Lisa Pauline Mattackal and Ankika Biswas
(Reuters) - The S&P 500 and the Nasdaq hit record highs on Tuesday, powered by semiconductors and megacaps, as Congress heard testimony from Federal Reserve Chair Jerome Powell, who said more "good" economic data would strengthen the case for interest-rate cuts.
AI-chip favorite Nvidia jumped 4%, while Applied Materials (NASDAQ:AMAT) and Micron Technology (NASDAQ:MU) gained 2% and 3%, respectively, steering the Philadelphia SE Semiconductor index to a record high.
The S&P 500 Information Technology Index also hit an all-time high, along with megacaps including Alphabet (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL), while Meta Platforms and Amazon.com (NASDAQ:AMZN) rose 0.9% and 0.3%, respectively.
Monday marked the 35th instance of the S&P 500 setting a fresh closing record this year, as sharp gains in AI-linked and other tech shares kept equity sentiment bright, offsetting the uncertainty around the Fed's rate-cut path.
However, the Dow Jones underperformed, with a 2% fall in Salesforce being the biggest drag on the blue-chip index.
Meanwhile, in his Congressional testimony, Powell said that while inflation "remains above" the 2% soft-landing target, it has been improving in recent months and "more good data would strengthen" the case for rate cuts.
"It does sound like Powell is just looking for a few more months of decent inflation data in order to have the confidence to start cutting, so that could put a September rate cut in play," said Brian Jacobsen, chief economist at Annex Wealth Management.
The last set of economic projections from the central bank's policymakers showed an expectation of just one rate cut this year. But markets have stuck to pricing in 50 basis points of easing, seeing a nearly 72% chance for a 25 bps cut at the Fed's September meeting, according to CME's FedWatch.
Those bets were at under 50% a month ago.
Crucial inflation data is also due this week, including Thursday's consumer price index and the producer price index reading on Friday.
Investors also await the start of the second-quarter corporate earnings season this week, with big banks due to report on Friday.
Analysts, on average, see S&P 500 companies increasing their aggregate earnings per share by 10.1% in the second quarter, up from an 8.2% increase in the first quarter, according to LSEG I/B/E/S data.
At 10:05 a.m. ET, the Dow Jones Industrial Average was down 147.89 points, or 0.38%, at 39,196.90, the S&P 500 was up 11.96 points, or 0.21%, at 5,584.81, and the Nasdaq Composite was up 86.31 points, or 0.47%, at 18,490.05.
Among single movers, Tempus AI jumped 7.5% after multiple brokerages including J.P.Morgan and Morgan Stanley (NYSE:MS) initiated coverage of the stock with bullish ratings.
Eli Lilly (N:LLY) edged up 0.6% after a data analysis report showed its treatment Mounjaro leads to faster and greater weight loss than Novo Nordisk (CSE:NOVOb)'s obesity drug, Wegovy.
CVS Health (NYSE:CVS) and UnitedHealth Group (NYSE:UNH) fell 0.9% and 0.4%, respectively, after the U.S. Federal Trade Commission said a handful of pharmacy benefit managers exercized an outsized influence over prescription drug prices.
Declining issues outnumbered advancers for a 1.51-to-1 ratio on the NYSE, and for a 1.31-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and nine new lows, while the Nasdaq recorded 38 new highs and 74 new lows.