Wall Street equities rose on Wednesday while U.S. Treasury yields pared gains and the dollar lost ground after Federal Reserve Chair Jerome Powell said the central bank could slow the pace of interest rate hikes “as soon as December”, even as he cautioned that inflation was still too high.
His words appeared to soothe investors who were fearing a more hawkish statement even as Powell warned that the fight against inflation was far from over and that key questions remain unanswered, including how high rates will ultimately need to rise and for how long.
“The market is taking this glass-half-full, it could’ve been worse approach. Powell didn’t really say anything that new,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in Charlotte, North Carolina.
“The path of least resistance since the last inflation number has been higher. There’s momentum to the upside in place until something outright stops it,” said Samana.
“Policy continues to tighten. People are just not appreciating it,” he added, noting that even if the Fed were to pause rate hikes it is still shrinking the balance sheet which he sees as “almost as important if not more important than the level of rates.”
The Dow Jones Industrial Average (.DJI) rose 210.82 points, or 0.62%, to 34,063.35, the S&P 500 (.SPX) gained 48.55 points, or 1.23%, to 4,006.18 and the Nasdaq Composite (.IXIC) added 228.54 points, or 2.08%, to 11,212.32.
In Treasuries, Benchmark 10-year notes were down 3.9 basis points to 3.709%, from 3.748% late on Monday. The 30-year bond was last down 1.1 basis points to yield 3.7912%, from 3.802%. The 2-year note was last down 4.5 basis points to yield 4.4277%, from 4.473%.
In currencies, the dollar index fell 0.533%, with the euro up 0.46% to $1.0374.
The Japanese yen strengthened 0.35% versus the greenback at 138.23 per dollar, while sterling was last trading at $1.2011, up 0.49% on the day.
Oil prices were rallying on Wednesday on signs of tighter supply, a weaker dollar and optimism about a potential recovery of demand in China.
U.S. crude rose 3.04% to $80.58 per barrel and Brent was at $85.41, up 2.87% on the day.