- Stocks rose across the board after Fed Chairman Jerome Powell signaled a slowing in the pace of tightening as early as December, while also indicating more hikes to combat inflation. Bond yields fell alongside the dollar.
- Despite the optimism, the S&P 500 closed at a two-month high, marking the index's longest monthly winning streak since August 2021. The index also broke through its 200-day moving average, which some analysts believe will herald further gains. The Nasdaq 100 increased by 4.5%. The Dow Jones Industrial Average was up 20% since its low in September.
- Bond traders reduced their expectations for how high the Fed might need to raise its benchmark, with swap markets predicting the key overnight rate will peak below 5%.
- Powell's remarks, made during a speech at the Brookings Institution in Washington on Wednesday, are likely to cemented expectations that the Fed will raise interest rates by 50 basis points when it meets on December 13-14, following four straight 75 basis-point increases. He also stated that rates are likely to rise somewhat higher than officials predicted in September.
- Prior to Powell's remarks, Fed Governor Lisa Cook stated that it would be prudent for the central bank to make smaller hikes as it determines how far it needs to go to tame price gains.
- Traders also scrutinized several economic reports, with key indicators of US activity painting a mixed picture for the third quarter. Job openings fell in October, which is a positive sign for the Fed as it seeks to reduce demand.
- The figures come ahead of Friday's jobs report, which is expected to show that employers added 200,000 workers to payrolls in November. Economists predict that the unemployment rate will remain at 3.7% and that average hourly earnings will moderate.
