Dow gains 400 points as Powell hints Fed may slow pace of rate hikes, Nasdaq up 4%

Stocks rallied on Wednesday after the Federal Reserve announced its long-awaited 0.75 percentage point rate hike to fight inflation, but hinted it may slow the pace of its rate hike at some point .

The Dow Jones Industrial Average rose 436.05 points, or nearly 1.4%, to 32,197.59. The S&P 500 gained 2.62% to close at 4,023.61. The Nasdaq Composite rose 4.06% to 12,032.42. Tech stocks led gains a day after quarterly results from Alphabet and Microsoft.

Stocks hit session highs in the afternoon as Fed Chairman Jerome Powell left the door open on the size of the central bank’s rate move at its next meeting in September, noting that it would eventually curb the magnitude of rate hikes. Powell told a news conference that the Fed could raise rates again by 0.75 percentage points in September, but that would depend on the data.

“As the stance of monetary policy tightens further, it will likely be appropriate to slow the pace of hikes while we assess how our cumulative policy adjustments impact the economy and inflation,” he said.

Investors were also encouraged after Powell noted that he does not believe the economy is currently in recession. The GDP reading for the second quarter will take place on Thursday.

Investors have continued to worry that the central bank’s ongoing efforts to reduce inflation will push the economy into a recession, or that we are already in it. Those fears eased on Wednesday after Powell said he does not believe the U.S. is currently in recession, adding that “there are too many areas of the economy that are doing too well.”

“The reason this is providing some relief to the stock market is that the Fed recognizes that there may be an impact on the growth of the economy depending on its policy,” said Gargi Chaudhuri, head of the BlackRock’s iShares investment strategy for the Americas. “They’re recognizing that there are two sides to this — there’s a trade-off for growth to fight inflation. That recognition is something we had today that we didn’t hear before.”

Many consider two consecutive quarters of negative GDP readings a recession, but the National Bureau of Economic Research, the official arbiter of recessions, uses many other factors to determine one. Thursday’s GDP reading is expected to show barely any expansion after first quarter GDP fell 1.6%.

Stocks started the day on a high note after getting a boost from tech gains. Tech stocks added to those gains as the overall market recovered.

Alphabet shares rose about 7.7% after the tech giant’s quarterly report showed strong revenue from Google’s search business. Microsoft gained about 6.7% after reporting a 40% increase in revenue growth for Azure and cloud services. The gains came even after both companies posted earnings and revenue below analysts’ estimates.

Shares of Meta Platforms rose nearly 6.6%, ahead of their expected gains after the bell. Amazon advanced more than 5% after being hit by retail carnage on Tuesday. Apple added 3.4%.

Retailers also rallied as inflation concerns eased late Wednesday. Walmart, which led retail decliners in the previous session, rose about 3.8%. Kohl’s, Ross Stores and Costco each added more than 2%. The SPDR S&P Retail ETF advanced about 2.6%.

Enphase Energy also emerged from its latest results, ending the day 17.9% higher. Chipotle added 14.7% after posting mixed second-quarter results.

Read today’s market coverage in Spanish here.

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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!