Following Powell’s comments, US STOCKS-Wall Street is rising

Following Powell's comments, US STOCKS-Wall Street is rising

After Federal Reserve Chair Jerome Powell stated the U.S. central bank is “strongly committed” to bringing down inflation, U.S. stock indexes crept up in choppy trading on Wednesday, with healthcare companies offsetting losses in the oil sector. Powell emphasized that continuing hikes in the policy rate would be reasonable, with the precise pace depending on the economic outlook, in his statement to the Senate committee. Powell also vowed a “overarching focus” on bringing down the decades-high inflation rate. Powell stated, “We are not aiming to trigger a recession, and I don’t think we will need to provoke one.

“There isn’t this we-will-do-whatever-it-takes ironclad commitment that you might expect would be the predecessor to perhaps really aggressive rate hikes that might lead to a rapid decline in output.” Wall Street has been whipsawed in recent sessions as traders debate if the market has found a bottom in the wake of a sharp sell-off on concerns that aggressive policy moves by central banks could trigger a global economic slowdown.

Powell’s comments came a week after the Fed raised interest rate by three-quarters of a percentage point, its largest increase since 1994. Economists expect a similar move next month, followed by a half-percentage-point rise in September, according to a Reuters poll. “It’s the dovish side of very hawkish … a little bit less clear and a little bit less than totally committed,” said Thomas Simons, money market economist at Jefferies, New York.

At 11:50 a.m. ET, the Dow Jones Industrial Average was up 38.42 points, or 0.13%, at 30,568.67, the S&P 500 was up 8.44 points, or 0.22%, at 3,773.23, and the Nasdaq Composite was up 42.94 points, or 0.39%, at 11,112.24. Markets were also supported by a fall in oil prices. The energy sector fell 3.6% to be the biggest loser among the 11 major S&P sectors. Healthcare and real estate jumped 1.6% and 1.8%, respectively.

“We have come to a realization that rates are going higher, whether we’re going into a recession or not is debatable.” Dow Inc slid 5.2% after Credit Suisse downgraded the chemicals maker’s stock to “underperform”. Declining issues outnumbered advancers for a 1.07-to-1 ratio on the NYSE. Advancing issues outnumbered decliners for a 1.12-to-1 ratio on the Nasdaq. The S&P index recorded one new 52-week high and 38 new lows, while the Nasdaq recorded nine new highs and 142 new lows.

Rate-sensitive growth and technology stocks climbed. Microsoft Corp and Inc rose 0.5% and 0.7% to lead the Nasdaq higher. “The meaningful move lower in oil has dampened some of the rampant inflation fears … with the rates moving lower, that’s prompted a significant short covering move in technology names across the board,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

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