Stocks soar as official hints rates won’t rise

Head of Federal Reserve eases investor concerns about interest increases

NEW YORK— U.S. stocks rocketed to their biggest gain in eight months Wednesday after Federal Reserve chairman Jerome Powell hinted that the Fed might not raise interest rates much further. The Dow Jones industrial average surged 617 points.

In a speech to the Economic Club of New York, Powell said that rates are close to “neutral,” the level at which they neither hold back growth nor aid it. That might mean the Fed isn’t planning to raise interest rates far above their current levels. Powell also appeared to suggest that the Fed might pause its cycle of interest rate increases next year so the central bank can assess the effects of its actions.

That relieved investors who feel the nine-year-old bull market could come to an end if rates rise too fast. Those worries have contributed to the market’s big slump in October and November. The other major factor is the trade dispute between the U.S. and China. Presidents Donald Trump and Xi Jinping are scheduled to discuss their differences this weekend at a meeting of the Group of 20.

Wall Street has grown pessimistic that the nations will resolve their differences any time soon. Whether they make progress or not, stocks could have a strong reaction to the TrumpXi meeting.

Stocks rose in morning trading and nearly tripled their gains as Powell spoke. Bond yields slipped and the dollar weakened as investors adjusted their expectations for how quickly interest rates might rise in the future.

The Dow Jones industrial average jumped 617.70 points, or 2.5 per cent, to 25,366.43. The Nasdaq composite rose 208.89 points, or 2.9 per cent, to 7,291.59.

The S&P/TSX composite index closed up 227.16 points to 15,171.25, the largest single-day gain since Feb. 17, 2016.

The cannabis-heavy healthcare sector posted the largest gains on the day, but the rally was fuelled by the key materials, industrials and financial sectors on the back of rising gold and metals prices and strong bank earnings reports.

The Canadian dollar traded down at an average of 75.18 cents (U.S.) compared with an average of 75.25 cents (U.S.) on Tuesday. The December gold contract was up $10.20 (U.S.) at $1,223.60 (U.S.) an ounce.