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Wall Street ends higher as hopes for less aggressive Fed grow

Stock Markets Oct 21, 2022 06:36PM ET
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2/2 © Reuters. FILE PHOTO: A woman stands in front of the logo of Snap Inc on the floor of the New York Stock Exchange (NYSE) in New York City, NY, U.S. March 2, 2017. REUTERS/Lucas Jackson 2/2
 
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By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks surged to close out the trading week on Friday after a report said the U.S. Federal Reserve will likely debate on a smaller interest rate hike in December, raising hopes the central bank may be poised to adopt a less aggressive policy stance.

Some Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to a Wall Street Journal report, and how to signal plans to approve a smaller increase in December.

San Francisco Federal Reserve President Mary Daly echoed that sentiment and said it's time to start talking about slowing the pace of the hikes in borrowing costs and doing so should avoid sending the economy into an "unforced downturn" by hiking interest rates too sharply.

In addition, Chicago Federal Reserve Bank President Charles Evans reiterated his stance the Fed should get policy to "a bit above" 4.5% by early next year and then hold it there.

Analysts widely expect the Fed to hike rates by 75 basis points for a fourth straight meeting in November. Equities have been under pressure this year as the central bank has embarked on an aggressive rate hike path as it attempts to reign in stubbornly high inflation, increasing worries of a policy error that will send the economy into a recession.

"You had the (report) and then you had some confirmation that 75 seems to be pretty baked in for November here but perhaps there is room to slow and extend... rather than front-load so high and then have to peel off, you kind of ease to your 4.75% or 5% peak," said Tom Hainlin, senior investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.

"Then maybe just hold there for a while so you are getting a little bit of relief."

The Dow Jones Industrial Average rose 748.97 points, or 2.47%, to 31,082.56, the S&P 500 gained 86.97 points, or 2.37%, to 3,752.75 and the Nasdaq Composite added 244.87 points, or 2.31%, to 10,859.72.

For the week, the S&P 500 climbed 4.74%, the Dow gained 4.89% and the Nasdaq rose 5.22%. Each of the three major indexes notched their biggest weekly percentage gains in four months.

The report helped stocks recover from early losses as Snap Inc (NYSE:SNAP) plunged 28.08% after posting its slowest quarterly revenue growth in five years as advertisers cut spending due to inflation and geopolitical woes.

That weighed on other companies that rely heavily on ad revenue such as Meta Platforms Inc, down 1.16% and Pinterest (NYSE:PINS), off 6.40%.

Also falling after reporting quarterly earnings were American Express (NYSE:AXP), which lost 1.67% and Verizon Communications (NYSE:VZ), down 4.46%.

American Express said it built bigger provisions to prepare for potential defaults as an economic downturn looms while Verizon's profit slid 23% and the carrier missed estimates for wireless subscriber additions.

Next week will bring earnings from names such as Twitter, Microsoft Corp (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Apple Inc (NASDAQ:AAPL).

Despite the recent batch of disappointing results, third-quarter earnings season has so far has been better-than-feared, with growth expectations for S&P 500 companies at 3.1%, according to Refinitiv data, up from 2.8% earlier in the week but still well below the 11.1% forecast at the start of July.

Schlumberger (NYSE:SLB) shot up 10.33% to help to lift the S&P 500 energy sector 2.76% after reporting a quarterly profit above expectations.

Volume on U.S. exchanges was 12.15 billion shares, compared with the 11.57 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 2.59-to-1 ratio; on Nasdaq, a 2.03-to-1 ratio favored advancers.

The S&P 500 posted 9 new 52-week highs and 32 new lows; the Nasdaq Composite recorded 60 new highs and 322 new lows.

Wall Street ends higher as hopes for less aggressive Fed grow
 

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Comments (58)
Bill Hand
Bill Hand Oct 22, 2022 11:25AM ET
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Woulldn’t place too much stock in non-voting Daly. Shes always the most Dovish of the group, San Francisco of course.
Kerry Ditto
Kerry Ditto Oct 22, 2022 11:21AM ET
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Powell is the FED. whatever other fed members or non-fed members say don't matter. Powells did not say anything close to pivoting. 75bp hike in Nov. is near-sure thing. because of massive fiscal measures, inflation will get worse. so 75bp in Dec is inevitable. stock market will continue to fall.
Dave Jones
Dave Jones Oct 22, 2022 11:12AM ET
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4.5% is like pssing into the wind if you're serious about inflation at 10%. Fed is a laughing stock.
Hunt Richardson
Hunt Richardson Oct 22, 2022 9:53AM ET
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less aggressive rate hikes because the economy will slow, possibly into recession
nils Hullmann
nils Hullmann Oct 22, 2022 7:55AM ET
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yes yes mr biden yes the green market you ordered will be on time for midterms...dont worry about the poll numbers we got your back...sincerly the FED
Vnod Be
Vnod Be Oct 22, 2022 7:54AM ET
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Today has $1.8trillion of option notional expiry, over half of this is SPX am ($1.04tr) and $350bn each of single stock + ETF; the largest strike of SPX open interest is 3700 with 85,000 options expiring at 9:30.
KUMAR SUB
SHA_USA Oct 22, 2022 5:51AM ET
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Until mid term election green will appear and FED will talk about soft landing..... after election they will talk about hawkish...
Tilak Mundu
tluck Oct 22, 2022 2:37AM ET
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Healine has been changed from selloff to rallies....ha ha
Kevin Wilkie
Kevin Wilkie Oct 21, 2022 5:22PM ET
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The fed IS the market.
ji ll
ji ll Oct 21, 2022 4:38PM ET
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wall street journal made so money buying calls ahead of the news
 
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