Fed's Powell Signals Smaller Rate Hikes Ahead, Driving Equities Higher

Last Updated: Wednesday, November 30, 2022 4:38 PM | MT Newswires

US benchmark indices logged solid gains on Wednesday after Federal Reserve Chair Jerome Powell said the central bank could start reducing the size of its interest rate increases as soon as next month.

The Nasdaq Composite rose 4.4% to 11,468, while the S&P 500 surged 3.1% to 4,080.1. The Dow Jones Industrial Average increased 2.2% to 34,598.8. Technology, communication services, and consumer discretionary posted the biggest gains, with all sectors ending in the green.

"The time for moderating the pace of rate increases may come as soon as the December meeting," Powell said during a speech in Washington, DC. "Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level," he added.

Markets are pricing in a roughly 77% chance that the Fed will limit its next rate rise to 50 basis points, with a 23% probability for another 75-point hike, according to the CME FedWatch Tool.

The US 10-year yield slid 11.1 basis points to 3.64%, and the two-year rate plunged 13.8 basis points to 4.34%.

In economic news, Q3 US gross domestic product growth was revised higher to a 2.9% increase versus the 2.6% gain in the advance estimate, above expectations for an upward revision to a 2.8% advance in a survey conducted by Bloomberg.

US job openings fell in October while quits nudged lower in a sign that the labor market may be weakening amid the Federal Reserve's monetary policy tightening. Vacancies fell to 10.3 million as of the last day of October, down from 10.7 million job openings at the end of September, according to the Bureau of Labor Statistics.

US private job creation slowed by the most since January 2021 as rising interest rates appeared to be impacting the labor market, according to ADP's (ADP) National Employment Report.

Pending home sales fell for the fifth straight month in October as mortgage rates reached the highest level in two decades, the National Association of Realtors said.

West Texas Intermediate crude oil futures rose 3% to $80.55 per barrel.

Inventories of crude, excluding the strategic petroleum reserve, in the US decreased by 12.6 million barrels through Nov. 25 to 419.1 million barrels, according to the Energy Information Administration. The consensus on Investing.com was for a draw of 2.76 million barrels.

In company news, CrowdStrike (CRWD) expects a sequential decline in its fiscal Q4 net new annual recurring revenue as concern that a recession is lurking further stretched its sales cycles. Shares of the cybersecurity group plummeted nearly 15%, the worst performer on the Nasdaq.

The top gainer on the index was Workday (WDAY), up 17%, after the company reported Q3 sales and earnings above estimates and unveiled plans to buy back up to $500 million of its shares.

Gold rose 1.1% to $1,783.10 per troy ounce, and silver climbed 4.3% to $22.36 per ounce.

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