Reassuring words send stocks higher

Wall Street ends slump after Fed official downplays hike

NEW YORK — Stocks rose Thursday for their first gain in three days, even as bond yields climbed to tighten the squeeze on Wall Street.

The S&P 500 rose 29.96 points, or 0.8 percent, to 3,981.35 after erasing a morning loss. The Dow Jones Industrial Average added 341.73, or 1 percent, to 33,003.57, while the Nasdaq composite gained 83.50, or 0.7 percent, to 11,462.98.

Stocks flipped from losses to gains after a Federal Reserve official made comments that raised hopes the central bank may not ramp up its fight against inflation as aggressively as feared. That countered recent talk from other officials who raised worries about much bigger increases to interest rates following several hotter-than-expected reports on the economy.

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, told reporters that for now he still supports lifting the Fed’s key overnight rate to a range of 5 percent to 5.25 percent, up from its current 4.50 percent to 4.75 percent. That’s lower than a good chunk of investors on Wall Street are forecasting.

“That’s what gave the market a little hope, that there is a voice not saying to raise the terminal rate,” or where the Fed will ultimately stop hiking rates, said Brent

Schutte, chief investment officer at Northwestern Mutual Wealth, “because a lot of the other people who talk seem like they’re constantly saying: ‘Elevator Up.’”

Higher rates can drive down inflation because they slow the economy, but they also raise the risk of a recession down the line. They likewise hurt prices for stocks and other investments.

“This is where we’re at now,” Schutte said. “We’re making policy based upon — and the market is moving off — every month’s data rather than people paying attention to the trend. And these things get revised.

That’s why it’s so volatile.”

The mood was more dour in the morning after a report showed fewer workers applied for unemployment benefits last week for a third straight week.

It’s the latest data to show the job market remains more resilient than expected, even though the Federal Reserve has jacked up interest rates at the fastest pace in decades.

While that’s good news for workers and calms fears about a recession in the near term, the fear is that a too-strong jobs market could add upward pressure to inflation.