Dow rises 400 points as Powell hints Fed may slow pace of rate hike, Nasdaq jumps 4%

Stocks rose on Wednesday after the Federal Reserve announced its expected 0.75 percentage point increase to combat inflation, but hinted that it may slow the pace of its hiking campaign at some point.

The Dow Jones Industrial Average jumped 436.05 points, or nearly 1.4%, to 32,197.59. The S&P 500 rose 2.62% to close at 4,023.61. The Nasdaq Composite Index rose 4.06% to 12,032.42. Technology stocks led the gains a day after Alphabet and Microsoft reported quarterly results.

Stocks hit session highs in the afternoon as Federal Reserve Chairman Jerome Powell left the door open on the size of the central bank’s rate movement at its next meeting in September, and indicated it would eventually slow the scale of rate hikes. Powell said at a press conference that the Fed could rise 0.75 percentage points again in September, but it will depend on the data.

“With the monetary policy stance tightening, it will likely become appropriate to slow the pace of increases as we assess how our cumulative policy adjustments affect the economy and inflation,” he said.

Investors were also encouraged after Powell indicated that he does not believe the economy is currently in a recession. The second-quarter GDP reading is due on Thursday.

Investors remained concerned that the central bank’s continued efforts to bring down inflation would push the economy into recession, or that we might already be in a recession. Those fears subsided on Wednesday after Powell said he did not believe the United States was in a recession, adding that “there are many economic areas that are doing very well.”

“The reason this is providing some relief to the stock market is because the Fed recognizes that there can be an impact on the growth of the economy based on its policy,” said Garji Chaudhry, iShares’ Americas head of investment strategy at BlackRock. “They realize there are two sides to this: there is a growth trade-off to fight inflation. This recognition is something we have today that we haven’t heard before.”

Many consider two consecutive quarters of negative GDP readings a recession, but the National Bureau of Economic Research, the official arbiter of recessions, uses several other factors to determine one of them. Thursday’s GDP reading is expected to barely show an expansion after Q1 GDP fell 1.6%.

Today’s stocks got off to a big start after getting a boost from technology earnings. Technology stocks added to those gains as the overall market rebounded.

Alphabet shares rose about 7.7% after the tech giant’s quarterly report showed strong earnings from Google’s search business. Microsoft gained nearly 6.7% after reporting a 40% jump in revenue growth for Azure and cloud services. The gains came even after both companies reported lower earnings and revenue than analysts’ estimates.

Shares of Meta Platforms rose nearly 6.6%, ahead of its scheduled earnings after the bell. Amazon advanced more than 5% after being hit by Tuesday’s retail carnage. Apple added 3.4%.

Retailers also rose as inflation concerns eased Wednesday afternoon. Walmart, which led the decline in retail prices in the previous session, rose about 3.8%. Kohl’s, Ross Stores, and Costco added more than 2% each. SPDR S&P Retail ETF offers around 2.6%.

Enphase Energy also stood out on the back of its recent results, ending the day 17.9% higher. Chipotle added 14.7% following the release of conflicting earnings for the second quarter.

Read today’s market coverage in Spanish here.

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