Stocks finish mixed as Fed's Powell says rates will remain low

U.S. equity markets ended mixed Wednesday after Federal Reserve Chairman Jerome Powell said the central bank expects to keep rates low for the foreseeable future and traders digested details of the Democrats' $3.5 trillion spending plan while sifting through a busy morning of earnings and economic data.

The Dow Jones Industrial Average rose 45 points, or 0.13%, while the S&P 500 gained 0.1% and and the Nasdaq Composite slipped 0.22%. All three of the major averages finished just below their record highs. 

Federal Reserve Chairman Jerome Powell testified on Capitol Hill and said the central bank still anticipates the recent surge in inflation will be temporary and that rates will remain near zero "for some time."

The producer price index report out Wednesday showed prices rose 1% in June and 7.3% year over year, the most since recordkeeping began in November 2010.  

Following the report, the 10-year yield fell 5.9 basis points to 1.356%. 

This as Senate Democrats reached a $3.5 trillion "human infrastructure" deal that would provide funding to expand Medicare, address climate change, child care and education. The Democrats, who plan to raise taxes on large businesses and individuals, will attempt to pass the package through the reconciliation process, allowing them to avoid a Republican filibuster.

"You add that to that the $600 billion in a bipartisan plan and you get to $4.1 trillion, which is very, very close to what President Biden has asked us for," said Senate Majority Leader Chuck Schumer of New York.

In stocks, Bank of America Corp. reported quarterly revenue that missed Wall Street estimates as lower interest rates caused a 6% drop in net interest income. The lender released $1.6 billion of reserves that had been built up to protect against losses during the pandemic.

Citigroup Inc. exceeded Wall Street estimates for earnings and revenue and said the pace of the global recovery is exceeding expectations.

Wells Fargo & Co. beat on both the top and bottom lines, but warned of tepid loan demand and a headwind from low interest rates.

Cannabis stocks were in focus after a group of Democratic lawmakers led by Senator Chuck Schumer D-NY, outlined early details of legislation that would make marijuana legal at the federal level.

Elsewhere in earnings, Delta Air Lines Inc. earned a profit for the first time since the outbreak of the COVID-19 pandemic. The airline said U.S. leisure travel has fully recovered, and that business travel could be 60% recovered by September. American Airlines also updated its financial forecast to reflect an improving travel picture. 

Meanwhile, Apple Inc. was added to the Focus List at J.P. Morgan, which raised its price target to $175 from $170. Additionally, a Bloomberg News report said Apple plans to increase iPhone production for 2021 by as much as 20%. 

In commodities, West Texas Intermediate crude oil fell $2.12 to $73.13 a barrel after Saudi Arabia and the United Arab Emirates reached a deal on production, and gold rose $14.90 to $1,824.30 an ounce.

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Overseas markets were broadly lower. 

Britain’s FTSE 100 paced the decline in Europe, trading down 0.47%, while France’s CAC 40 and Germany’s DAX 30 ended unchanged. 

In Asia, China’s Shanghai Composite lost 1.07%, Hong Kong’s Hang Seng index fell 0.63% and Japan’s Nikkei 225 slipped 0.38%.