Stocks on Wednesday recovered in an intraday turnaround as investors shrugged off a quarter-point rate hike from the Federal Reserve and instead focused on comments from Fed Chairman Jerome Powell that acknowledged falling inflation.
The S&P 500 gained 1.05% to end at 4,119.21, reversing an earlier decline of nearly 1%. The Nasdaq Composite added 2% to close at 11,816.32, boosted by gains in chipmakers after strong earnings from Advanced Micro Devices. Meanwhile, the Dow Jones Industrial Average rose 6.92 points, or 0.02% to 34,092.96 – after sliding more than 500 points at the day’s lows.
The Fed’s latest rate hike represented a slowdown from a half-point increase in December, a nod to investors who had hoped the central bank would ease its aggressive tightening campaign. They were further encouraged by Powell’s comments.
“We can say now for the first time that the deflation process has started. We can see that and we really see it in commodity prices so far,” Powell said at a post-meeting press conference.
However, the central bank gave no hint of a pause in hikes, maintaining language in its post-meeting statement that “continued increases in the target range will be appropriate to achieve a monetary policy stance that is sufficiently restrained to yield inflation Back. to 2 percent over time.”
In statements at the press conference, Powell said that the Fed would need to be restrictive for a while and that the central bank had more work to do.
“I don’t see any signs yet that the Fed is open to rate cuts in 2023,” said Bill Zox, portfolio manager at Brandywine Global. “I’m not sure that the Fed is even trying for a soft landing. Although they would never say, maybe they prefer the restorative aspects of a recession and a proper bear market.”
There have been some recent signs that inflation is easing in the wider economy and the Fed acknowledged this, saying in its post-meeting statement that it has “reduced somewhat but is still elevated.”
Stock benchmarks also gained as fourth-quarter corporate earnings mostly showed resilient profits. Peloton shares rose 26.5% after the fitness equipment company said its net loss narrowed year over year. Advanced Micro Devices shares gained 12.6% after the semiconductor company reported a fourth-quarter earnings beat.
Wall Street is having a strong month. The S&P 500 reached its best January performance since 2019, while the high-tech Nasdaq Composite delivered its strongest January in 22 years.
