(Bloomberg) — Stocks rallied after Jerome Powell signaled a likely slowdown in the pace of tightening as early as December, while indicating more hikes will be needed to curb inflation.
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The S&P 500 erased losses and headed for a new milestone: its longest monthly winning streak since August 2021. Gains in the tech-heavy Nasdaq 100 topped 3% as bond yields fell with the dollar.
“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said Wednesday. He added that rates are likely to reach a “somewhat higher” level than officials estimated in September.
Comments:
“Much of Chair Powell’s comments were benign and predictable. Overall, this speech will likely be bullish for the markets in the near term.”
“Powell is giving the Fed an off-ramp to 75 basis point moves, but I don’t think you can rule out anything else. There is a reasonably strong chance the Fed extends 50 basis point hikes or 25 basis point hikes.”
“This rally is a nonsense: Powell said they will slow down, but that rates will have to go higher than forecasted earlier. The market wants to listen only to the first part of Powell’s statement.”
Officials have signaled they plan to raise their benchmark rate by 50 basis points at their final meeting of the year on Dec. 13-14, after four successive 75 basis-point hikes which have lifted it to a 3.75% to 4% target range.
Ahead of Powell’s remarks, Fed Governor Lisa Cook said it would be prudent for the central bank to make smaller hikes as it determines how high it will need to go to tame price gains.
Traders also scoured several economic reports, with key gauges of US activity painting a mixed third-quarter picture. Job openings fell in October — a hopeful sign for the Fed as it seeks to curb demand.
The figures precede Friday’s jobs report, which is currently forecast to show employers added 200,000 workers to payrolls in November. Economists are expecting the unemployment rate to hold at 3.7%, and for average hourly earnings to moderate.
Read: Funds Line Up to Bet on More Dollar Pain After Brutal November
Key events this week:
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S&P Global PMIs, Thursday
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US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
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BOJ’s Haruhiko Kuroda speaks, Thursday
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US unemployment, nonfarm payrolls, Friday
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ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 1.8% as of 2:41 p.m. New York time
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The Nasdaq 100 rose 3.2%
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The Dow Jones Industrial Average rose 1%
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The MSCI World index rose 1.6%
Currencies
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The Bloomberg Dollar Spot Index fell 0.7%
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The euro rose 0.6% to $1.0394
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The British pound rose 0.7% to $1.2040
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The Japanese yen rose 0.3% to 138.16 per dollar
Cryptocurrencies
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Bitcoin rose 3.6% to $17,048.58
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Ether rose 5.7% to $1,289.09
Bonds
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The yield on 10-year Treasuries declined four basis points to 3.70%
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Germany’s 10-year yield was little changed at 1.93%
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Britain’s 10-year yield advanced six basis points to 3.16%
Commodities
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West Texas Intermediate crude rose 2.9% to $80.45 a barrel
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Gold futures rose 0.8% to $1,778 an ounce
This story was produced with the assistance of Bloomberg Automation.
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