Wall Street rises as Fed Powell hints at easing inflation after rate hike

  • The Federal Reserve raised interest rates by 25 basis points per second
  • Powell says that deflation has begun for the first time
  • Indexes: Dow 0.02%, S&P 1.05%, Nasdaq 2%

Feb 1 (Reuters) – The S&P 500 and Nasdaq edged higher on Wednesday after Federal Reserve Chairman Jerome Powell acknowledged that inflation is easing in comments that followed the U.S. central bank’s quarter-point interest rate hike. increased sharply.

Immediately after the announcement of the Federal Reserve’s decision to raise interest rates, the main indices of Wall Street lost ground. Its statement also said that a “continuous increase” in rates would be appropriate.

But indexes bounced off their lows and rallied after Powell spoke to reporters, with the S&P up 1% and the Nasdaq up 2%.

Investors were encouraged by Powell’s response to a question about easing financial conditions as stocks rose and bond yields fell in recent months, according to Angelo Korkfass, investment strategist at Edward Jones in St. Louis.

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“He had an opportunity to deliver a hawkish message and he didn’t take it,” he says. “He could tell the markets were getting overexcited and he didn’t take that opportunity. Instead he said a lot of pressure had already happened.” ” Korcfas.

As Powell said he could acknowledge for the first time that deflation had begun, investors saw his suggestion that there could be two more rate hikes as an “alternative,” according to the strategist.

The Dow Jones Industrial Average (.DJI) added 6.92 points, or 0.02%, to 34,092.96, the S&P 500 (.SPX) added 42.61 points, or 1.05%, to 4,119.21 and the Nasdaq Composite added 7.23 points, or 1.11%. 2 percent to 11816.32.

The afternoon rally saw the S&P hit its highest close since Aug. 25, while the Nasdaq posted its highest close since September.

Of the 11 major S&P 500 industrial sectors, only energy ended the day down 1.9 percent ( .SPNY ), while interest-rate-sensitive technology stocks ( .SPLRCT ) were the biggest gainers, up 2.3 percent.

Investors were mostly focused on the Federal Reserve’s path forward, as the size of the hike for its first policy meeting of the year was in line with expectations after a quick hike in 2022, including a 50 basis point interest rate hike in December.

After the press conference, money markets were betting on a closing rate of 4.892% in June, compared with a bet of 4.92% just before the Fed’s statement.

U.S. futures continued to price in a rate cut this year, with the federal funds rate at the end of December at 4.403 percent, the same as before the meeting.

Recent readings show that inflation is slowing, and the Fed is also looking at data that gauges the elasticity of the labor market and the pace of wage growth.

But data showed that U.S. job openings unexpectedly rose in December ahead of the Labor Department’s comprehensive January nonfarm payrolls report due on Friday.

Separate economic data showed that US manufacturing fell further in January as higher rates suppressed demand for goods.

All three indexes got off to a good start to the year, with the S&P (.SPX) and Dow (.DJI) seeing their first gains for January since 2019 as investors returned to markets that had been hit by a Federal Reserve shutdown last year. The warriors were defeated. .

Advancing issues outnumbered declining ones on the NYSE by a ratio of 2.86 to 1. On the Nasdaq, the ratio was 2.28 to 1 in favor of the advancers.

The S&P 500 hit 24 new highs in the past 52 weeks and had no new lows. The Nasdaq Composite posted 136 new highs and 23 new lows.

About 13.7 billion shares changed hands on U.S. exchanges, compared with the daily average of 11.5 billion over the past 20 sessions.

Reporting by Sinéad Carew and Stephen Culp in New York, Johann M Cherian and Shreyashi Sanyal in Bengaluru. Additional reporting by Ankika Biswas; Edited by Saryaj Kalovilla, Majo Samuel, and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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