Wall Street rallies as Fed chief Powell speaks after rate hike

Feb 1 (Reuters) – The S&P 500 and Nasdaq rallied to higher closes on Wednesday after Federal Reserve Chairman Jerome Powell acknowledged that inflation was starting to subside after a U.S. rate hike. a quarter point by the US central bank, which issued a statement that it expects “continued increases”

.Wall Street’s major indexes lost ground immediately after the statement and were volatile for a while, then started to regain ground after Powell responded to reporters about half an hour later.

Investors were encouraged by Powell’s response to a question at his press conference – about easing financial conditions such as stocks regaining ground and bond yields falling in recent months, according to Angelo Kourkafas, investment strategist at Edward Jones, St Louis.

“He had the opportunity to relay a hawkish message and didn’t take it. He could have said the markets were getting too excited and he didn’t take advantage of it. Instead, he said a lot of tightening had already happened,” Kourkafas said.

And since Powell acknowledged 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) gained 42.89 points, or 1.05%, to end at 4,119.49 points, while the Nasdaq Composite (.IXIC) gained 231.89 points, or 2.00%, to 11,816.44. The Dow Jones Industrial Average (.DJI) rose 15.75 points, or 0.05%, to 34,101.79.

The scale of the increase for its first policy meeting of the year was in line with expectations after rapid increases in 2022 aimed at reining in decades-high inflation.

After the statement, money markets were betting on a terminal rate of 4.94% in June, down from 4.92% just before, but US futures still forecast rate cuts this year, with the fed funds rate at 4.486% at the end of December, the same as before the meeting.

Recent readings indicated that inflation is slowing, with the Fed also reviewing data that will determine the resilience of the labor market and the pace of wage growth.

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

Separate economic data showed the US manufacturing sector contracted further in January as rising rates stifled demand for goods.

All three indices had a strong start to the year, with the S&P (.SPX) and Dow (.DJI) posting their first gain for January since 2019 as investors returned to markets that had been battered the previous year. by a hawkish Fed. .Reporting by Sinéad Carew and Stephen Culp in New York, Johann M Cherian and Shreyashi Sanyal in Bengaluru; Additional reporting by Ankika Biswas; Editing by Sriraj Kalluvila, Maju Samuel and David Gregorio

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