Wall Street rallies as Fed's Powell nods to easing inflation after rate hike

• Published date: 02 February 2023
• Publication title: Malay Mail Online

The S and P 500 and the Nasdaq closed sharply higher yesterday after Federal Reserve chair Jerome Powell acknowledged that inflation was starting to ease, in remarks he made following a quarter-point rate hike by the US central bank.

Wall Street's major indexes had lost ground immediately after the Fed announced its rate hike decision. Its statement also said 'ongoing increases' to rates would be appropriate.

But the indexes bounced off their lows and kept gaining ground soon after Powell started speaking to reporters with the S and P ending up 1 per cent and the Nasdaq adding 2 per cent.

Investors were encouraged by Powell's answer to a question about easing financial conditions such as rising equities and falling bond yields in recent months, according to Angelo Kourkafas, investment strategist at Edward Jones, St Louis.

'He had an opportunity to relay a hawkish message and didn't take it. He could've said that markets are getting overly excited and he didn't take the opportunity. Instead he said a lot of tightening has already happened,' said Kourkafas.

Since Powell said he could acknowledge for the first time that disinflation had started to happen, investors saw his suggestion that there could be two more rate hikes as a 'placeholder', the strategist said.

The Dow Jones Industrial Average rose 6.92 points, or 0.02 per cent, to 34,092.96, the S and P 500 gained 42.61 points, or 1.05 per cent, to 4,119.21 and the Nasdaq Composite added 231.77 points, or 2 per cent, to 11,816.32.

The afternoon rally had the S and P registering its highest closing level since August 25 while the Nasdaq posted its highest close since September.

Of the S and P 500's 11 major industry sectors only energy ended the day lower, down 1.9 per cent, while interest rate sensitive technology shares were the biggest gainers, up 2.3 per cent.

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