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A pedestrians is reflected in an electronic stock board outside a securities firm in Tokyo, Japan. Photographer: Shiho Fukada/Bloomberg

(bloomberg)

(Bloomberg) -- The Nasdaq Composite Index closed at a record high as a recovery in technology shares emboldened investors and Federal Reserve Chairman Jerome Powell reiterated his upbeat assessment of the economy.

The dollar extended gains and Treasuries were little changed after Powell told a Senate committee that the Fed will continue to gradually raise interest rates “for now’’ to keep inflation near target amid a strong U.S. labor market. Technology shares had started the day lower after disappointing subscriber growth at Netflix weighed on the rest of the FAANG stocks.

“The ability of Netflix to bounce off its opening lows, and Amazon to do the same, has given investor’s confidence that the big momentum stocks are not suddenly going to fall out of bed,” said Matt Maley, equity strategist at Miller Tabak + Co. “The other thing is Chairman Powell did not say anything that was overly hawkish in his opening statement."

Earnings and U.S. monetary policy have become the main drivers of market sentiment this week. That’s giving respite from a backdrop of worsening trade relations between the world’s biggest economic powers. Company results have been mixed thus far, with Deutsche Bank AG and Bank of America Corp. beating estimates, counterbalancing the Netflix reading.

“The concern is as interest rates rise, what has been a market that’s stretched the bounds of valuation is going to have to be repriced to reflect higher rates,” Michael Arone, chief investment strategist at State Street Global Advisors, said in an interview at Bloomberg’s New York headquarters. “Any time there’s relief to that, folks are applauding the fact that valuations can stay a bit elevated for longer.”

Powell addressed Congress with the underpinnings of the U.S. expansion looking solid. Unemployment stands close to an 18-year low and inflation is around the Fed’s 2 percent target, though some sentiment indicators are starting to flash warning signs over escalating trade disputes. He will appear before the House Financial Services Committee Wednesday.

Crude recovered after tumbling more than 5 percent in two days and breaching key price levels as focus shifted to declining stockpiles in the U.S. In the U.S., crude stockpiles dropped by an estimated 4.2 million barrels last week, according to a Bloomberg survey of analysts ahead of an Energy Information Administration report on Wednesday and the industry-funded American Petroleum Institute later Tuesday.

Terminal users can read more in Bloomberg’s Markets Live blog.

These are some key events coming up this week:

  • Earnings season continues, with reports due from companies including: Morgan Stanley, American Express, Microsoft, Taiwan Semiconductor Manufacturing, Unilever and IBM.
  • Fed’s Powell delivers the semi-annual Monetary Policy Report to a House panel on Wednesday, and will answer lawmakers’ questions.
  • Euro-zone inflation data for June is expected on Wednesday to show the annual rate inched higher to 2 percent.

These are the main moves in markets:

Stocks

  • The S&P 500 Index rose 0.4 percent to 2,809.58 as of 4:03 p.m. in New York.
  • The Dow Jones Industrial Average gained 0.2 percent to 25,119.89.
  • The Nasdaq Composite Index rallied 0.6 percent to a record 7,855.12.
  • The U.K.’s FTSE 100 Index gained 0.3 percent.
  • The MSCI Emerging Market Index slumped 0.1 percent.
  • The Stoxx Europe 600 Index rose 0.2 percent.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4 percent, the first increase in four days.
  • The euro slipped 0.4 percent to $1.1664.
  • The British pound dropped 0.9 percent to $1.3115.
  • The Japanese yen weakened 0.5 percent to 112.84 per dollar.
  • South Africa’s rand fell 0.4 percent to 13.27 per dollar.

Bonds

  • The yield on 10-year Treasuries rose less than one basis points to 2.86 percent.
  • Italian 10-year yields fell 11 basis points to 2.47 percent.
  • Germany’s 10-year yield fell two basis points to 0.35 percent.

Commodities

  • West Texas Intermediate crude was little changed at $68.11 a barrel.
  • Gold fell 1.1 percent to $1,227.61 an ounce, the third straight daily decline.

--With assistance from David Wilson.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Olivia Schaber in New York at oschaber1@bloomberg.net

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Dave Liedtka

©2018 Bloomberg L.P.

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