Dow gains 300 points as optimism grows after Powell signals smaller rate hikes ahead
Shares climbed on Wednesday when central bank chairman Jerome Powell confirmed that the central bank will slow the pace of its aggressive interest rate hike campaign that has weighed on markets.
The Dow Jones Industrial Average was up 318 points, or 0.9%. Meanwhile, the tech-heavy Nasdaq Composite rose 2.9%. The S&P 500 gained 1.8%.
“It makes sense to moderate the pace of our rate hikes as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in a speech at the Brookings Institution in Washington, DC. “The time to moderate the pace of interest rate increases may come as soon as the December meeting.”
Powell warned that the Fed could stay with restrictive policy for a long time before it ends its fight against inflation.
“Despite some promising developments, we have a long way to go to restore price stability,” Powell said.
Powell’s comments bolstered growing optimism among some investors that the Fed will deliver a smaller rate hike of 0.5 percentage point at its next meeting after four consecutive 0.75 percentage point hikes to tame high inflation. Any signal of a pivot on future rate hikes is likely to send markets higher.
“Investors are looking for that cliff of safety — something to hang their hat on for greater predictability of where the Fed wants to go with interest rates,” said Greg Bassuk, managing director of AXS Investments. “The announcement that the pace of rate hikes could begin to slow as early as December was that cliffhanger.”
The 10-year government yield fell slightly on the news.
Wednesday’s jump gives 11th hour steam to growth already seen by the indices during November. With just hours left in trading, both the Dow and S&P 500 are set to end the month up more than 4% and 3%, respectively, while the Nasdaq Composite is on track to gain 2.4%.
