US stocks rallied after the Federal Reserve indicated it may not need to pump the brakes any harder on Wall Street and the economy.
- The S&P 500 rose 44.06 points, or 1.1%, to 4,237.86.
- The Dow Jones Industrial Average rose 221.71 points, or 0.7%, to 33,274.58.
- The Nasdaq composite rose 210.23 points, or 1.6%, to 13,061.47.
Treasury yields also eased in the bond market after the Fed announced its decision to
hold interest rates steady, as expected. The Fed hinted that a swift rise since the summer in Treasury yields, and the resulting tumble in stock prices, may be slowing inflation on their own and acting like rate-hike substitutes.
Fed Chair Jerome Powell said in the afternoon that the central bank still isn't sure its main interest rate is high enough to ensure high inflation will move down to its 2% target. That kept alive the possibility of more hikes by the Fed. He also said that cuts to rates, which can act like steroids for financial markets, aren't even on Fed officials' minds at the moment. But Powell acknowledged that a recent run higher in longer-term Treasury yields, and the tumble in stock prices it caused, are working on their own to slow the economy and could be starving high inflation of its fuel. If they can do that persistently, he said they could help the Fed whip inflation without requiring more rate hikes.
The jump in yields has already brought the average 30-year fixed mortgage rate to nearly 8%, for example, "and those higher costs are going to weigh on economic activity to the extent this tightening persists, " Powell said. He added that the Fed has time to sit still on rates to assess the effects of its rate hikes after unleashing a furious barrage beginning early last year. Big US companies continue to report stronger profits for the summer than analysts expected, though that often hasn't been enough in recent weeks to offset worries about higher yields. DuPont fell 8.2% despite reporting stronger profit for the latest quarter than analysts had forecast.
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Estee Lauder also pointed to slower growth in China, among other factors, when it cut some of its financial forecasts for its fiscal year. The company also reported weaker revenue for the latest quarter than expected, and its stock tumbled 18.9%. On the winning side of Wall Street, chipmaker Advanced Micro Devices rose 9.7% after it reported stronger profit and revenue for the latest quarter than forecast. Its revenue forecast for the end of 2023 disappointed some analysts, but it also pointed to growth in 2024 coming from the artificial-intelligence boom. Gains of 2.4% for Microsoft, 1.9% for Apple, and 3.8% for Nvidia were the three strongest forces pushing the S&P 500 higher.
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