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  • Fed Chairman Powell reiterates his optimistic economic outlook in his testimony.
  • Industrial production in the U.S. rebounds in June following May’s contraction.
  • Johnson & Johnson’s upbeat earnings lift the healthcare sector.

After starting the day in a relatively calm manner, major equity indexes in the United States gained traction to close the day with decisive gains as comments from the Fed Chairman Powell improved the market sentiment. In fact, the CBOE Volatility Index (.VIX), Wall Street’s fear gauge, dropped more than 6% on the day to point to a higher risk appetite.

The risk-sensitive S&P 500 Information Technology Index (SPLRCT) closed the day 0.8% higher and helped the tech-heavy Nasdaq Composite Index to gain 49.40 points, or 0.63%, to 7,885.12.

Delivering his semiannual monetary policy report in a testimony  before The Committee on Banking, Housing, and Urban Affairs, Chairman Powell reassured that the economy  was strong and further gradual rate hikes would be appropriate. Responding to a question regarding the potential impact of the Trump administration’s trade policy on the economy, Powell stated that there was no precedent for the current trade policy disputes and added that he was in favor of an open trade arrangement.

Commenting on Powell’s remarks, “he reiterated the view of the economy as being strong, growing at a solid pace with recent inflation data as more or less encouraging, and he’s taking the same stance he did in the last statement,” Peter Cecchini, chief market strategist at Cantor Fitzgerald in New York, told Reuters.

In the meantime, boosted by upbeat earnings figures, Johnson & Johnson shares outperformed their rivals to gain over 4% on the day and helped the  S&P 500 Health Care Index (SPXHC) to add 0.55%.

On the other hand, crude oil prices struggled to make a meaningful recovery on Tuesday and continued to weigh on the energy shares. The  S&P 500 Energy Index (SPNY) erased 0.38% on Tuesday.  

At the end of the session,  the Dow Jones Industrial Average was up 55.53 points, or 0.22%, at 25,119.89, and the S&P 500 added 11.12 points, or 0.40%, to 2,809.55.

DJIA Technical Outlook (via FXStreet Chief Analyst Valeria Bednarik)

“The Dow is at its highest since mid-June, and despite the upward momentum decelerated, technical readings in the daily chart continue to favor additional gains ahead, given that the index holds above all of its moving averages, with the 20 DMA currently crossing above the 100 DMA, both in the 24,500 area, as technical indicators consolidate right below overbought levels.”

“In the shorter term, and according to the 4 hours chart, an intraday slide found buyers around a firmly bullish 20 SMA, now providing a dynamic support at around 25,030, the Momentum turned neutral, flat above its mid-line, while the RSI heads north around 66, all of which skews the risk to the upside.”

According to the analyst, supports are located at 25,074, 25,030, and  24,979   while resistances align at 25,157, 25,198, and 25,244.