Dow rises 400 points as Powell suggests Fed could slow rate hikes, Nasdaq jumps 4%

Shares rose on Wednesday after the Federal Reserve announced its long-awaited 0.75 percentage point rate hike to fight inflation, but hinted it could slow the pace of its walking campaign at some point.

The Dow Jones Industrial Average rose 436.05 points, or nearly 1.4%, to 32,197.59. The S&P 500 gained 2.62% and closed at 4,023.61 points. The Nasdaq Composite climbed 4.06% to 12,032.42. Tech stocks led gains a day after Alphabet and Microsoft’s quarterly results.

Stocks reached their session peak in the afternoon when Fed Chair Jerome Powell left the door open on the magnitude of the central bank’s interest rate movement at its next meeting in September, noting that it would eventually slow the size of rate hikes. Powell said in a news conference that the Fed could increase by 0.75 percentage points again in September, but that would depend on the data.

“As the stance of monetary policy tightens further, it will likely become appropriate to slow the pace of increases as we assess how our cumulative policy adjustments affect the economy and inflation,” he said.

Investors were also encouraged after Powell noted that he does not believe the economy is currently in recession. The GDP reading for the second quarter is scheduled for Thursday.

Investors continued to worry that the central bank’s continued efforts to lower inflation will push the economy into recession, or that we may already be in recession. Those fears eased on Wednesday after Powell said he doesn’t think the US is currently in a recession, adding that “too many parts of the economy are underperforming.”

“The reason this provides some relief for the stock market is that the Fed recognizes that their policies could have an impact on economic growth,” said Gargi Chaudhuri, head of BlackRock’s iShares investment strategy for America. “They recognize that there’s two sides to this: there’s a growth trade-off to fight inflation. That recognition is something we had today that we didn’t hear before.”

Many consider two consecutive quarters of negative GDP readings a recession, but the National Bureau of Economic Research, the official arbiter of recessions, uses multiple other factors to determine one. Thursday’s GDP reading is expected to show barely any growth, after GDP fell by 1.6% in the first quarter.

Stocks started the day on a high note after receiving a boost from technical earnings. Tech stocks added to those gains as the general market rose.

Shares of Alphabet rose about 7.7% after the tech giant’s quarterly report showed strong earnings from Google’s search business. Microsoft gained nearly 6.7% after reporting a 40% increase in revenue growth for Azure and cloud services. The gains came even after both companies posted earnings and revenues below analysts’ estimates.

Meta Platforms shares were up nearly 6.6%, better than the profit planned after the bell. Amazon is up more than 5% after it was hit by the retail massacre on Tuesday. Apple added 3.4%.

Retail also recovered as inflation concerns eased on Wednesday afternoon. Walmart, which led to declines in retail sales in the previous session, climbed about 3.8%. Kohl’s, Ross Stores and Costco each added more than 2%. The SPDR S&P Retail ETF rose about 2.6%.

Enphase Energy also fell on the back of its latest results, finishing the day about 17.9% higher. Chipotle added 14.7% after publishing mixed results for the second quarter.

Read today’s market coverage in Spanish here.

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