Stocks surge on news of ‘neutral’ interest rates

NEW YORK — U.S. stocks rocketed to their biggest gain in eight months yesterday 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.

After slashing interest rates to near zero before the 2008-09 financial crisis, the Fed has been steadily raising them since the end of 2015 and it’s expected to announce another increase in December. But higher interest rates tend to slow economic growth, and since growth in the U.S. and other regions is already likely to slow down next year, investors are concerned the increases will hinder the economy.

The S&P 500 index surged 61.61 points to 2,743.78, its biggest gain since March 26. The S&P 500 has gained 4.2 percent this week, but would still need to rise another 6.8 percent to return to its record high from late September.

The Dow Jones Industrial Average jumped 617.70 points to 25,366.43. The Nasdaq composite rose 208.89 points to 7,291.59.