Stocks rally, Dow rises over 550 points in final hour after Powell signals smaller rate hikes ahead

US stocks rose in the final hour of trading on Wednesday after Federal Reserve Chairman Powell said the pace of interest rate hikes by the central bank could slow as soon as the December meeting, while investors digested a range of economic data. including a weaker-than-expected reading of private sector wages and an upward revision to economic growth in the third quarter.

In TuesdayThe Dow gained 3.07 points, the S&P 500 fell 0.2% and the Nasdaq Composite slipped 0.6%.

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US stocks ended the month on a positive note as traders appreciated a speech by Federal Reserve Chairman Jay Powell, who indicated that the central bank may decide to raise interest rates at a slower pace at its next political meeting.

“The time to slow the rate hike may come as soon as the December meeting,” Powell said in a speech to the Brookings Institution.

He said the final level of the Fed’s benchmark interest rate would have to be higher than was thought a few months ago, and he tried not to talk about cutting interest rates.

Look: Powell says the pace of rate hikes could slow as soon as the December meeting

“Powell needs to keep talking tough, but he has given Wall Street reason for hope,” said David Russell, vice president of market intelligence at TradeStation Group. “Everyone knows that interest rate hikes take time to work, and we’re seeing their effects as the labor market cools.”

“We’ve seen progress in the CPI and even Powell expects more downward pressure as commodity prices fall. Powell confirmed what the market already knew and set the stage for some revisions to forecasts next month. This could allow investors to view the glass as half full at the end of the year,” Russell said in an emailed comment.

Stocks rallied after Powell’s speech with the large-cap index erasing all of the losses of the previous two sessions, on pace to post a 3.9% monthly gain. The Dow Jones Industrial Average gained 4.6% for the month, while the Nasdaq Composite rose 2.4%, according to Dow Jones market data.

Powell’s comments also made the 1-year rate
which he had rose to nearly 4.9% earlier in the day but settled around 4.788%.

Look: Treasury market’s march to 5% halted by Fed’s Powell

“Investors like tangible information, so even though this isn’t a transcript of the meeting, you have the chair coming out and giving what investors see as a much more tangible symbol than even the minutes we saw last week,” Shelby McFaddin, senior analyst at Motley Fool Asset Management, MarketWatch said by phone.

Connected: Fed’s Beige Book Finds Inflation Slowing, But Recession Worries Grow

The U.S. economy grew steadily in the fall and inflation eased slightly, according to a Federal Reserve survey known as A beige book found, but many firms expressed “greater uncertainty or increased pessimism” about the year-end outlook.

Data released Wednesday morning showed U.S. job vacancies fell to 10.3 million in October in another sign the labor market is cooling as the economy softens, but the cooling may not be enough to satisfy the Fed. Job postings fell from 10.7 million in September, the Labor Department said.

ADP on Wednesday said the private sector added 127,000 jobs in November. Economists polled by The Wall Street Journal had expected an average increase of 190,000. In other data, Third-quarter gross domestic product data was revised to show a 2.9% year-on-year increase against an initial estimate of 2.6%.

The S&P 500, the benchmark for U.S. stocks, has lost 17 percent this year after the Federal Reserve quickly raised borrowing costs from effectively zero in March to a range of 3.75 percent to 4 percent by November.

One of the Fed’s most closely watched gauges of inflation, the personal consumer spending index, will be released on Thursday, followed on Friday by the monthly employment report from the US Labor Department.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said that whatever the upcoming data shows, it may be difficult for stocks to gain much in the short term.

“Strong economic data, such as strong growth and strong jobs, means the Fed will continue its aggressive tightening and may aim for relatively higher terminal rates.” This is bad for stock valuations. And the data on soft inflation and easing spending is good for Fed expectations, but it will raise the odds of a recession, which is clearly not good for stock valuations either,” she said in a morning bulletin.

“As a result, we certainly topped the last rally in the S&P 500 and the 200-day moving average, which is around 4,050, which also coincides with the top of the year-to-date descending channel, should mark the end of the last bearish rally.” with an expectation of a further drop to potentially around the 3400 mark. I’m sorry,” Ozkardeskaya finished.

Connected: Here’s what stock market investors are getting wrong about China and its zero-covid policy, economists say

Elsewhere overnight, markets in China continued to recover following the country’s zero-covid protests triggered a sharp sell-off on Monday. The Hong Kong Hang Seng Index

jumped 2.2% on Wednesday, recording a monthly gain of more than 25%. That was the biggest monthly percentage gain since 1998, according to Dow Jones Market Data.

Despite the new news about contract for manufacturing in Chinaconcerns about that country’s COVID restrictions impacting the global economy appear to have died down for now, allowing investors to refocus on the theme that has driven stocks for most of the year: the Fed’s monetary policy trajectory.

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— Jamie Chisholm contributed to this article.

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