Stocks rose on Wednesday as investors shrugged off the Fed’s quarter-point rate hike and focused instead on comments from Fed Chairman Jerome Powell acknowledging falling inflation.
The S&P 500 rose 1.05% to close at 4,119.21, reversing an earlier loss of nearly 1%.The Nasdaq Composite rose 2 percent to close at 11,816.32, helped by chipmakers Advanced Micro DevicesCompanyMeanwhile, the Dow Jones Industrial Average rose 6.92 points, or 0.02 percent, to 34,092.96 – after falling more than 500 points from the day’s low.
The Fed’s recent rate hikes have slowed from a half basis point in December, suggesting investors hope the central bank will ease back on its aggressive tightening drive. They were further encouraged by Powell’s comments.
“We can now say for the first time that the deflationary process has begun. We can see that, and we’ve really seen it in commodity prices so far,” Powell said in a post-meeting news conference.
However, the central bank did not really signal a pause in rate hikes, retaining in its post-meeting statement that “sustained growth within the target range would be appropriate to achieve a monetary policy stance sufficient to limit inflation” to 2% over time. “
Powell added in his remarks at the news conference that the Fed needs to be restrictive for some time and that the central bank has more work to do.
“I haven’t seen signs that the Fed is open to cutting rates in 2023,” said Bill Zox, portfolio manager at Brandywine Global in New York. “I’m not sure the Fed is trying to achieve a soft landing. While they would never say so, they probably prefer the restorative aspect of a recession and a proper bear market.”
There have been some recent signs that inflation across the economy is slowing, and the Fed acknowledged this, saying in its post-meeting statement that inflation “has eased but remains elevated.”
Equity benchmarks also got a boost as fourth-quarter corporate earnings continued to largely show resilient profits. Row Shares soared 26.5% after the fitness equipment company said its net loss narrowed year-over-year. Advanced Micro DevicesCompany Shares of the semiconductor company jumped 12.6% after the semiconductor company reported better-than-expected fourth-quarter results.
Wall Street was strong. The S&P 500 had its best January since 2019, while the tech-heavy Nasdaq Composite had its strongest January in 22 years.