Stocks saw broad gains on Wednesday after Federal Reserve Chairman Jerome Powell confirmed that the central bank will slow down its aggressive campaign to raise interest rates that has weighed on the markets.
The Dow Jones Industrial Average closed up 737.24 points, or 2.18%, to 34,589.77 points. Meanwhile, the Nasdaq Composite Heavy Index jumped 4.41% to 11468.00. The S&P 500 rose 3.09% to 4,080.11.
“It makes sense that we should reduce the pace of our price increases as we approach a level of restraint that will be sufficient to bring down inflation,” he said. He said in a speech at the Brookings Institution in WashingtonDC “the time may come to adjust the pace of interest rate increases as soon as the December meeting.”
Powell warned that the Fed may remain restrictive for a long time before ending its fight against inflation.
“Despite some promising developments, we still have a long way to go to restore price stability,” Powell said.
Powell’s comments reinforced growing optimism among some investors that the Fed will raise interest rates by half a percentage point at its next meeting on December 14 after four consecutive increases of three-quarters of a point to tame soaring inflation.
“Investors are looking for that rock of certainty — something to hang onto in order to increase the predictability of where the Fed is going with regard to interest rates,” said Greg Pasuk, CEO of AXS Investments. “The messages that the pace of the rate increase could start to slow as early as December has been that rock.”
The 10-year Treasury yield fell slightly on the news.
Wednesday’s rally provided an 11 hour boost to the November win. The Dow and S&P 500 ended the month up nearly 5.7% and about 5.4%, respectively, while the Nasdaq Composite was up about 4.4%.
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