No news is good news for Wall Street

A trader works, as a screen displays a news conference by Federal Reserve Board Chairman Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024. 

Brendan McDermid | Reuters

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Stocks regain ground
Wall Street ended Wednesday’s session higher, snapping a two-day losing streak. The Dow finished about 0.2% higher. The S&P 500 and Nasdaq Composite added around 0.5% and 0.6%, respectively, as investors looked ahead to Fed Chair Jerome Powell’s second day of testimony on Capitol Hill.

Powell reiterates stance
Powell repeated that the central bank isn’t ready to start lowering interest rates, in prepared remarks for his first day of testimony on Capitol Hill. His remarks broke no new ground on monetary policy, but highlighted officials were still concerned about not losing the progress made against inflation.

Microsoft’s disturbing AI content
Shane Jones, who’s worked at Microsoft for six years, has been testing the tech giant’s AI image generator and warned about the sexual and violent content the tool was creating. He said the company isn’t taking appropriate action.

China banks’ reserve cut
Pan Gongsheng, governor of the People’s Bank of China, signaled there was room to further cut banks’ reserve requirements. Pan and other key leaders of the country’s economy and financial sector were speaking on the sidelines of the annual parliamentary meetings.

[PRO] India’s promising ETFs
Tapping India’s promising market isn’t as straightforward for foreign investors as buying shares listed on the Indian stock exchanges. Portfolio managers highlight one of the simplest routes is through ETFs that specifically track indexes comprised of Indian stocks.

The bottom line

No news is, perhaps, good news as far as Wall Street is concerned.

Fed Chair Jerome Powell stuck closely to script in the first of two Capitol Hill appearances this week.

In prepared remarks, he told lawmakers the Fed expects to cut rates this year in order to avoid unnecessarily constraining growth. But he also noted progress toward hitting the Fed’s 2% inflation goal wasn’t “assured.”

“Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy,” Powell said. “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

Investors are keeping a close watch on the Fed chief’s comments to get more clarity on the central bank’s timing for rate cuts. 

“The waiting game continues. Everything else in the written testimony is boilerplate about progress on inflation over the past year and the strength of the labor market,” wrote Ian Shepherdson chairman and chief economist at Pantheon Macroeconomics. “In short, no surprises, no news.”

 Mohamed El-Erian, Allianz chief economic advisor posted on X, that Powell “is facing some quite aggressive Congressional questioning on the impact of high rates … His response is, understandably, to repeatedly refer back to the inflation mandate.”

“The situation would have been less uncomfortable for the Fed had it not mischaracterized the inflation problem for so long in 2021, been so late in its policy response,” he added.

“Therefore, had to hike rates aggressively and to a higher level than would have been otherwise necessary.”

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