Feb 1 (Portal) – The S&P 500 and Nasdaq rallied to higher closes on Wednesday after Federal Reserve Chair Jerome Powell admitted inflation was easing following a quarter-point rate hike by the Federal Reserve , which issued a statement, expects “ongoing increases”.
Wall Street’s major indices lost ground immediately after the statement and were volatile for a time. They then began gaining serious ground again after Powell responded to reporters about a half hour later.
Investors were heartened by Powell’s response to a question asked during his press conference about easing financial conditions, with stocks regaining ground in recent months and bond yields falling in recent months, according to Angelo Kourkafas, investment strategist at Edward Jones, St Louis.
“He had an opportunity to deliver a restrictive message and he didn’t take it. He could have said markets were overly excited and he didn’t take the opportunity. Instead, he said that a lot of tightening has already taken place,” he told Kurkafas.
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And with Powell acknowledging the disinflation, investors saw his suggestion that there could be two more rate hikes as a “placeholder,” the strategist said.
According to preliminary data, the S&P 500 (.SPX) was up 42.89 points, or 1.05%, to 4,119.49 points, while the Nasdaq Composite (.IXIC) was up 231.89 points, or 2.00%, to 11,816.44 . The Dow Jones Industrial Average (.DJI) was up 15.75 points, or 0.05%, to 34,101.79.
The size of the hike for the first policy meeting of the year was in line with expectations after rapid hikes in 2022 aimed at taming decades of inflation.
Following the statement, money markets were betting on a final interest rate of 4.94% in June, compared to 4.92% just before, but US futures are still pricing in rate cuts this year, with the fed funds rate at 4.486 by the end of December % was the same as before the meeting.
Recent readings have shown that inflation is easing, with the Fed also looking at data that will determine job market resilience and the pace of wage growth.
However, data showed that US job vacancies rose unexpectedly in December ahead of Friday’s release of the Labor Department’s comprehensive report on January nonfarm payrolls.
Separate economic data showed that US manufacturing contracted further in January as higher interest rates dampened demand for goods.
All three indexes got off to a strong start to the year, with the S&P (.SPX) and Dow (.DJI) posting their first January gains since 2019 as investors returned to markets battered by a dovish Fed the previous year.
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 Sriraj Kalluvila, Maju Samuel and David Gregorio
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