Wall Street ends January on high note

Optimistic that Fed’s next rate increase will be last for a while

NEW YORK — Wall Street closed out a strong January with more gains Tuesday, ahead of what many investors hope will be one of the Federal Reserve’s last hikes to interest rates for a while.

Markets got a boost after a report showed that that growth for workers’ pay and benefits slowed during the end of 2022. While that’s frustrating for people trying to keep up with soaring prices, markets see it as an encouraging sign of easing pressure on inflation and possibly a gentler Fed in the months ahead.

The S&P 500 rose 58.83 points, or 1.5 percent, to 4,076.60. The benchmark index notched its third winning month in the last four. The Dow Jones Industrial Average rose 368.95 points, or 1.1 percent, to 34,086.04. The Nasdaq rose 190.74 points, or 1.7 percent, to 11,584.55.

With the pace of inflation cooling since the summer, virtually all of Wall Street expects the Fed on Wednesday to announce its smallest increase to interest rates since March, at 0.25 percentage points. That would be the latest stepdown after it pushed through four straight increases of 0.75 points and then a hike of 0.50 points.

Such moves try to stamp out inflation by intentionally slowing the economy and dragging down on prices for stocks and other investments. The worry is that too-high rates would cause a severe recession and dropoff in corporate profits.

Such worries, combined with hopes for an easier Fed, have led to sharp swings in markets recently. They’ve hit not only day-to-day but also hour-to-hour. Analysts say much of this past month’s gains has been more about improving sentiment among investors than any big improvement in the economy or profits.

“As long as the Fed is raising interest rates, you will have market volatility,” said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth.

“This is a market that is very bipolar,” she said. “And that’s actually healthy for a market. You don’t want one skewed too bullish,” or optimistic, and “you don’t want one skewed too bearish,” or pessimistic. “I think we’re balancing out that extreme bearishness in the market.”

She sees stocks continuing to grind higher through the year, led in particular by energy and industrial companies, though that may get hidden when simply looking at market indexes like the S&P 500 because those stocks are relatively small pieces of the market.