Arkansas Democrat-Gazette

Fed chief’s interest rate remarks give stocks a boost

- STAN CHOE Informatio­n for this article was contribute­d by Yuri Kageyama and Matt Ott of The Associated Press.

NEW YORK — U.S. stocks climbed to records Thursday, with easier interest rates beckoning on the horizon.

The S&P 500 rallied 1% to set its 16th all-time high so far this year. It’s on track for its 17th winning week in the past 19 after erasing the last of its losses from Monday and Tuesday.

The Dow Jones Industrial Average added 130 points, or 0.3%, and the Nasdaq composite jumped 1.5% to finish just shy of its record.

Federal Reserve Chair Jerome Powell said in testimony on Capitol Hill that the central bank is “not far” from delivering the cuts to interest rates that Wall Street craves so much. He said again that the Fed is just waiting for additional data to confirm inflation is cooling.

It’s a key point on Wall Street because cuts to rates would release pressure on the economy and the financial system, while goosing investment prices. After shelving earlier hopes for cuts to begin in March, traders now see June as the likeliest starting point. The Fed’s main interest rate is at its highest level since 2001.

After getting criticism for waiting too long before raising interest rates when inflation was accelerati­ng, Powell faced questions from the Senate’s banking committee about the possibilit­y that it could be too late in cutting rates. That would cause undue pain because high rates slow the economy.

“We’re well aware of that risk, of course,” Powell said.

He said if conditions continue as expected, including a strong job market and cooling inflation, cuts will come later this year. Cutting rates too early could risk a reaccelera­tion of inflation.

Treasury yields eased in the bond market after a couple of reports gave potential signals of lessened pressure on inflation.

The yield on the 10-year Treasury dipped from 4.11% late Wednesday to 4.08%. It’s been generally falling since topping 5% last fall, which can encourage borrowing across the economy and investors to pay higher prices for stocks. The twoyear Treasury yield, which moves more closely with expectatio­ns for the Fed, fell by more.

Across the Atlantic, traders were also trying to guess when the European Central Bank will begin cutting interest rates after its president said it’s making progress on getting inflation under control.

One report said slightly more U.S. workers applied for unemployme­nt benefits last week than expected, though the number remains low relative to history.

A separate report said U.S. workers were able to produce more goods per hour during the last three months of 2023 than expected. Such improvemen­t is key because it can allow the economy to grow without adding as much upward pressure on inflation.

A potentiall­y more impactful report will arrive this morning, when the U.S. government will give its latest monthly update on the job market. The hope among traders is that the job market remains healthy but not so much that it deters the Fed from cutting interest rates.

On Wall Street, Kroger shares jumped 9.9% for the biggest gain in the S&P 500 after it reported strongerth­an-expected profit for the end of 2023. It also gave a forecast range for profit in the upcoming year whose midpoint was above analysts’ estimates.

Nvidia was again the strongest force lifting the S&P 500 upward and climbed 4.5%. It’s been on a nearly unstoppabl­e run and has soared 87% this year after more than tripling last year amid Wall Street’s frenzy around artificial intelligen­ce technology.

Victoria’s Secret was on the losing end even after it reported stronger profit for the latest quarter than expected. It said it expects overall sales to fall this year, when analysts were looking for modest growth. The shares tumbled 29.7%.

Shares of embattled New York Community Bancorp climbed 5.8% a day after going on a wild ride. The bank, which is confrontin­g weakness in commercial real estate and growing pains resulting from its buyout of a distressed bank, announced a lifeline of more than $1 billion from a group of investors on Wednesday.

All told, the S&P 500 rose 52.60 points to 5,157.36. The Dow gained 130.30 to 38,791.35, and the Nasdaq composite climbed 241.83 to 16,273.38.

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