Stocks rallied on Wednesday’s intraday turnaround as investors wavered. A quarter point rate hike The Federal Reserve and instead focused on comments from Fed Chairman Jerome Powell that acknowledged falling inflation.
The S&P 500 rose 1.05% to end at 4,119.21, reversing an earlier decline of nearly 1%. The Nasdaq Composite added 2% to close at 11,816.32, boosted by gains in chipmakers following strong earnings. Advanced Micro Devices. Meanwhile, the Dow Jones industrial average rose 6.92 points, or 0.02%, to 34,092.96 — after falling more than 500 points from the day’s lows.
The central bank’s latest hike marked a drop from its half-point increase in December, giving investors permission that the central bank will ease its aggressive tightening campaign. They were further encouraged by Powell’s comments.
“Now for the first time we can say that the inflationary process has started. We can see it and we’re really seeing it in commodity prices so far,” Powell said at a post-meeting press conference.
However, the central bank gave no real indication of suspending hikes, saying in its post-meeting statement that “continued increases in the target range would be appropriate to achieve a stance of monetary policy that is sufficiently accommodative to bring inflation back to 2 percent over time.”
In remarks at a press conference, Powell said the Fed needs to be restrained for some time and that the Fed has more work to do.
“I don’t see any signs yet that the Fed is open to 2023 rate cuts,” said Phil Chokes, portfolio manager at Brandywine Global. “I don’t know that the Feds are trying for a soft landing. Although they won’t say so, they probably like the restorative aspects of a recession and a proper bear market.”
There have been some recent signs that inflation is easing in the broader economy, and the central bank acknowledged in a post-meeting statement that it had “declined somewhat, but remains elevated”.
Equity benchmarks also gained momentum as corporate earnings continued to show resilient gains in the fourth quarter. Peloton Shares rose 26.5% after the fitness equipment company said Net loss decreased year-on-year. Advanced Micro Devices Shares rose 12.6% after the semiconductor company Reported fourth quarter earnings beat.
Wall Street is coming off a strong month. The S&P 500 posted its best January performance since 2019, while the tech-heavy Nasdaq Composite had its strongest January in 22 years.