Stocks soar on Fed rate easing signal

Powell indicates inflation now cooling, cautious on next steps

Wall Street closed out a solid November with a broad market rally Wednesday after the head of the Federal Reserve said the central bank could soon begin easing up on its aggressive interest rate increases aimed at taming inflation.

Fed Chair Jerome Powell, speaking at the Brookings Institution, reaffirmed that the central bank could begin moderating its pace of rate hikes as soon as December, when its policymaking committee is due to hold its next meeting.

“We have a risk management balance to strike,” Powell said. “And we think that slowing down (on rate hikes) at this point is a good way to balance the risks.”

Stocks roared higher following Powell’s midafternoon remarks.

The S&P 500 rose 3.1 percent, snapping a three-day losing streak. The Dow Jones Industrial Average gained 2.2 percent and the Nasdaq composite climbed 4.4 percent.

“Perhaps all that the market was looking for today was confirmation that we’re going to have a smaller rate hike in December,” said Kristina Hooper, chief global market strategist at Invesco.

While citing some recent signs that inflation is cooling, Powell stressed that the Fed will push rates higher than previously expected and keep them there for an extended period to ensure inflation comes down sufficiently.

“History cautions strongly against prematurely loosening policy,” Powell said. “We will stay the course until the job is done.”

The path ahead, though, is far from certain.

Major indexes have been unsteady all year as the economy and financial markets dealt with stubbornly hot inflation and the Fed’s attempt to cool high prices with aggressive interest rate increases.

In his remarks Wednesday, Powell said the Fed may increase its key interest rate by a smaller increment at its December meeting, only a half-point, after four straight three-quarter point hikes.

“Cutting rates is not something we want to do soon,” Powell said. “That’s why we’re slowing down.”

Investors welcomed the prospect of more modest rate hikes.

More than 95 percent of the stocks in the benchmark S&P 500 index notched gains Wednesday, with technology companies leading the gains.

Apple rose 4.9 percent and Microsoft jumped 6.2 percent.