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Wall Street rallies but trade choppy as investors digest Powell comments

Published 02/07/2023, 06:18 AM
Updated 02/07/2023, 07:16 PM
© Reuters. FILE PHOTO: U.S. Federal Reserve Chair Jerome Powell addresses reporters after the Fed raised its target interest rate by a quarter of a percentage point, during a news conference at the Federal Reserve Building in Washington, U.S., February 1, 2023. REUT

By Carolina Mandl and Johann M Cherian

(Reuters) - U.S. stocks rallied to a convincingly higher close on Tuesday, but trade was choppy as investors digested comments from Federal Reserve Chair Jerome Powell about how long the central bank may need to tame inflation.

Powell said 2023 should be a year of "significant declines in inflation."

His comments renewed investor hopes for less aggressive monetary policy that wavered after a strong U.S. jobs report last Friday. "We didn't expect it to be this strong," Powell said at the Economic Club of Washington, referring to the nonfarm payrolls report for January, but it "shows why we think this will be a process that takes quite a bit of time."

"Powell expects they're not going to be cutting rates anytime soon, but that there is a good path, that they’re accomplishing what they need to accomplish,” said Shawn Cruz, head trading strategist at TD Ameritrade.

Wall Street's main indexes fluctuated wildly during and after Powell's remarks, and analysts said volatility is unlikely to dissipate soon.

"Until we see softening and inflation throughout the economy and throughout the globe, it's going to be hard to push the markets up in a decisive fashion," said Carol Schleif, chief investment officer at BMO Family Office.

The tech-heavy Nasdaq rallied on news form Microsoft Corp (NASDAQ:MSFT), and the S&P 500 also got a boost. The company's shares rose 1.29% as it unveiled an integration of ChatGPT, a chatbot from OpenAI, into its products.

Following Powell's comments, Morgan Stanley (NYSE:MS) said it added 25 basis point to its forecast for the May policy meeting, but continued to expect the first 25 basis point rate cut for December, 2023.

Last week, the Fed raised interest rates by 25 basis points, with markets now pricing in a peak rate above 5% after Friday's strong jobs data.

U.S.-listed shares of Baidu Inc (NASDAQ:BIDU) soared 12.18% as the Chinese search engine said it would conclude testing of its ChatGPT-style project "Ernie Bot" in March.

Most sectors on the S&P 500 ended higher. The energy sector the top gainer as crude prices surged more than 3% on Powell's remarks. The technology and communication services sectors were also among top gainers.

Among top gainers on the Dow Jones Industrial Average, Boeing (NYSE:BA) Inc went up 3.84% after the U.S. planemaker confirmed it expects to cut about 2,000 white-collar jobs.

The Dow Jones Industrial Average rose 265.67 points, or 0.78%, to 34,156.69, the S&P 500 gained 52.92 points, or 1.29%, to 4,164 and the Nasdaq Composite added 226.34 points, or 1.9%, to 12,113.79.

Volume on U.S. exchanges was 11.98 billion shares, in line with the full session over the last 20 trading days.

On Monday, U.S. stock indexes were dragged by views that rates would stay higher for longer. Still, all three major averages are in the black for 2023, with the Nasdaq adding over 15%, led by a revival in battered mega-cap growth stocks.

So far, more than half of the companies on the S&P 500 have reported quarterly earnings, with 69.1% of them beating expectations, according to Refinitiv. Still, analysts expect fourth-quarter earnings to decline 3.1%.

DuPont (NYSE:DD) De Nemours Inc jumped 7.50% on a higher-than-expected quarterly profit supported by higher pricing for its products.

Bed Bath & Beyond (NASDAQ:BBBY) plunged almost 50% as the home-goods retailer sought to raise $1 billion in a last-ditch effort to avoid bankruptcy. The company completed the equity offering after the close of trading.

Later on Tuesday, U.S. President Joe Biden will deliver the annual State of the Union address to a joint session of Congress.

Advancing issues outnumbered declining ones on the NYSE by a 1.68-to-1 ratio; on Nasdaq, a 1.42-to-1 ratio favored advancers.

© Reuters. FILE PHOTO: U.S. Federal Reserve Chair Jerome Powell addresses reporters after the Fed raised its target interest rate by a quarter of a percentage point, during a news conference at the Federal Reserve Building in Washington, U.S., February 1, 2023. REUTERS/Jonathan Ernst/File Photo

The S&P 500 posted 5 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 90 new highs and 31 new lows.

(This story has been corrected to change the title to chief investment officer, instead of deputy chief investment officer, in paragraph 6)

Latest comments

I heard Powell broke wind, so he’s telegraphing a crash
I heard Powell blew a fart onstage, so i think he is telgraphing a crash
how many
too much greed that all are dillusional of a fed pivot
FED and power does not do their job properly, if market misunderstand something, FED must make it clear, but today Powell looks like enjoy it. No No No Do your job or market will be crashed and if's FED's failure.
they are the debt ceiling and the govt is beeding on debt interes, how much more can they afford to run the tab?
Until the rest of the world de dollarises and turns the USA into Zimbabwe.
But then we wont buy their junk and they will become even bigger Zimbabwe. The world might hate us but they need us and if shtf, US military will come out on top. Hella positioning we got ourselves.
The world doesn't hate the US. Authoritarian oppressors hate the US.
anybody else making a ton of money in this market?
wall street rises as wall street rises due to wall street rising.
Inflation will keep going down by calculation as the history reference data used in inflation index computation are keep getting higher. Inflation is just a relative number of the current goods price to previous days price. I am sure the inflation will drop to below 2% when such as a pack of eggs is selling for $30 in a few months. This is the game that Powell is playing to cheat working American and kissing the ass of the whit House.
markets never go down.
The more long term one looks, the more true that is.
first last exactly what the moaners in here don't seem to understand
Anyone else think that big banks like WCF, C, JPM, and COF are overvalued/overbought right now especially since earnings for banks dont look great right now? I didnt do a ton of dd (just WACC and fcf) so definitely could be wrong.
Another flagrant demonstration of fraud and criminal manipulation in THE BIGGEST INVESTMENT JOKE IN THE WORLD.
give it up man..
ryan just let the parrot squack..
just let the parrot squack..
Stock Rally? What part of Jerome Powell's speech did Wall Street not understand
they always revert it what as seen for anyone straight
Jerome did get to see the jobs report before his speech last week - he gets early sight of it
Jerome wasn't the only one.
90% of all stocks are owed by those in the top 10% of wealth
Yes.   That's why discussions of Main Street & Wall Street should be separate.
Me too, I own an Index fund so ...
Yes but what about the debt ceiling?
Dave. Obviously, the market doesn't care about debt. A trillion in margins right now. Consumers can always get increased credit lines. Companies don't care if loans cost more as long as their stock goes up. The federal government doesn't care about debt, because soon we'll have the digital dollar and they can tax every financial transaction under the sun. No problems here. BULLY!!
Depends on how obstructionist the retrumplicans are.
Even in investing don't know what to say. loses, gain, flat. just put a subject not related and you save yourself change it every 30 minutes.
Gains...then crashes to the day's low.  Gotta love those algos.
powel failed to control his commands... i think he should start his journey from school again... just openion. Loll
is this the twilight zone
no
update the article lol
Gains?
LOL
WHERE???
The only "where' it's real......oil and gas.
Hogwash ! Inflation is very strong in survivables ( food, gas , fuel)
Food, gas, & fuel are called "survivables"?
stock market is a rigged pos.
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