By Noel Randewich and Shreyashi Sanyal

(Reuters) – Wall Street ended sharply higher on Wednesday after Federal Reserve Chair Jerome Powell said the central bank might scale back the pace of its interest rate hikes as soon as December.

The S&P 500 rallied and closed above its 200 day moving average for the first time since April after the release of Powell’s remarks prepared for delivery at the Brookings Institution think tank in Washington.

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Powell also cautioned that the fight against inflation was far from over and that key questions remain unanswered, including how high rates will ultimately need to rise and for how long.

“(The market) has waited with bated breath, looking for that clarification in terms of duration and extent of Fed tightening. And anything that gives hope to the idea the Fed is becoming less hawkish is viewed as a positive for stocks, at least on a short-term basis,” said Chuck Carlson, Chief Executive Officer at Horizon Investment Services in Hammond, Indiana.

Bets that the Fed will reduce the size of its rate hikes, as well as recent data pointing to a mild cooling in inflation, led the benchmark S&P 500 index to its second straight month of gains.

The CME FedWatch Tool showed futures traders seeing a 75% chance that the Fed will raise interest rates by 50 basis points at its December meeting, up from a 65% chance before Powell’s comments were released. The FedWatch tool now shows a 25% chance of a 75 basis point increase.

Nvidia rallied more than 8%, Microsoft jumped 6.2% and Apple climbed 4.9%.

Tesla Inc’s shares surged 7.7% after China Merchants Bank International said Tesla’s sales in China in November were boosted by price cuts and incentives offered on its Model 3 and Model Y.

The S&P 500 climbed 3.09% to end the session at 4,079.97 points.

The Nasdaq gained 4.41% to 11,468.00 points, while Dow Jones Industrial Average rose 2.18% to 34,589.24 points.

The Philadelphia Semiconductor index surged 5.85%, trimming its loss in 2022 to about 28%.

Volume on U.S. exchanges was heavy, with 15.0 billion shares traded, compared to an average of 11.1 billion shares over the previous 20 sessions.

For November, the S&P 500 climbed 5.4%, the Dow added 5.7% and the Nasdaq increased 4.4%.

An ADP National Employment report showed private employment increased by 127,000 in November, below expectations of 200,000 jobs, suggesting demand for labor was cooling amid high interest rates.

“The ADP employment number not meeting expectations fits into the narrative that the Fed will have room and start slowing down its rate hikes, and that definitely benefits interest rate sensitive assets,” said Keith Buchanan, a portfolio manager at Globalt in Atlanta.

The Labor Department’s closely watched nonfarm payrolls data is due on Friday. A report showed U.S. job openings falling to 10.334 million in October, against 10.687 million in the prior month.

Another reading showed the U.S. economy rebounded more strongly than initially thought in the third quarter.

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The S&P 500 remains down about 14% so far in 2022, while the Nasdaq index has lost about 27%.

Biogen Inc jumped 4.7% after its experimental Alzheimer’s drug slowed cognitive decline in a closely watched trial.

Advancing issues outnumbered falling ones within the S&P 500 by a 24.1-to-one ratio.

The S&P 500 posted 24 new highs and 1 new low; the Nasdaq recorded 117 new highs and 167 new lows.

(Reporting by Shreyashi Sanyal, Devik Jain & Bansari Mayur Kamdar in Bengaluru, and by Noel Randewich in Oakland, Calif.; additional reporting by Stephen Culp in New York; Editing by Shounak Dasgupta, Chizu Nomiyama and Diane Craft)

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