Stocks Surge As Powell Signals Smaller Rate Hikes Ahead
2:52 pm Wednesday, November 30th, 2022
The S&P 500 gained as Federal Reserve Chair Jerome Powell confirmed that the central bank will slow the pace of its aggressive rate-hiking campaign that has weighed on markets.
“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in a speech at the Brookings Institution in Washington, DC. “The time for moderating the pace of rate increases may come as soon as the December meeting.”
Powell’s comments bolstered growing optimism among some investors that the Fed deliver a smaller 0.5 percentage point rate hike at its next meeting after four consecutive 0.75 percentage point increases to tame high inflation. Any signal of a pivot on future rate hikes would likely send markets higher.
Market participants had a slate of economic data to digest today, some of which fueled the market’s slowdown concerns. The Chicago PMI reading for November (37.2) was particularly ugly looking, falling further into contractionary territory (i.e. sub-50 reading) than the market was expecting.
Other data releases included softer than expected ADP Employment Change number for November, the fifth straight monthly decline in the Pending Home Sales Index, and an upward revision to Q3 GDP (to 2.9% from 2.6%) and the GDP Price Deflator (to 4.3% from 4.1%), but that is backward-looking data.
Notably, Treasury yields have moved higher in front of Mr. Powell’s speech. The 2-yr note yield, which hit 4.45% overnight, sits at 4.53% now and the 10-yr note yield, which hit 3.68% overnight, sits at 3.77% now.
