NEW YORK (AP) — Stock prices on the New York Stock Exchange rose Wednesday after the Federal Reserve signaled it may no longer need to apply the brakes harder on Wall Street and the economy.
The S&P 500 index rose 1.1% in early trading after posting its third consecutive month of losses. The Dow Jones industrial average gained 221 points, or 0.7%, and the Nasdaq composite rose 1.6%.
Stocks added to their gains and Treasury yields declined after the Fed announced its decision to keep interest rates steady, as expected. The Fed already cut the overnight rate from near zero last year to its highest level since 2001, above 5.25%.
Fed Chair Jerome Powell said in the afternoon that the central bank is still not sure that its main interest rate is high enough to ensure that inflation falls to 2%, its goal. That kept alive the possibility that the Fed could raise it even further. He also said that interest rate cuts, which can act as steroids for financial markets, are not even on the minds of Federal Reserve officials right now.
However, Powell acknowledged that the recent rise in long-term Treasury yields — and the decline in stock prices it helped cause — are working on their own to slow the economy, and could be depriving to the inflation of your fuel. If they can do that persistently, he indicated they could help the Federal Reserve curb inflation without requiring it to implement further interest rate increases.
Rising yields have already pushed 30-year fixed mortgage rates to nearly 8%, for example, “and those higher costs are going to weigh on economic activity as this tightening persists.”
In addition, he said, the Federal Reserve has time to evaluate the full effects of its previous interest rate hikes, after unleashing an intense barrage of hikes last year.
The yield on the 10-year Treasury bond fell from 4.92% to 4.76%. Much of the decline came after the Federal Reserve floated the idea that rising bond yields and instability in financial markets could be slowing the economy on their own.
In total, the S&P 500 rose 44.06 points to finish at 4,237.86. The Dow Jones average gained 221.71 points, settling at 33,274.58, and the Nasdaq added 210.23 points, closing at 13,061.47.
Associated Press writers Matt Ott and Elaine Kurtenbach contributed to this report.
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2023-11-01 22:06:47
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