Stocks surged Wednesday after investors took comments by Federal Reserve Chairman Jerome Powell to mean that the central bank could be closer than expected to ending its current push to lift interest rates.
The remark by Powell that caused the markets to jump amounted to three words in a long speech about the financial system’s stability. In a speech to the Economic Club of New York, he said the Fed’s benchmark interest rate was approaching a “neutral” level that would no longer provide stimulus to the economy. The rate is now in a range from 2 percent to 2.25 percent, which Powell described as “just below” most estimates of the neutral level.
That contrasted with a statement by Powell in October, after the last rate change, that the benchmark rate was still “a long way” from neutral. Some investors interpreted his description Wednesday as a sign that the Fed might not raise rates quite as high as it previously indicated.
But some analysts warned that markets were overreacting to Powell’s remarks. The Fed is still expected to raise rates in December, and there was no clear sign that the policymakers would move more slowly than planned next year.
Stocks rose in morning trading and nearly tripled their gains as Powell spoke. Bond yields slipped and the dollar weakened as investors adjusted their expectations for how quickly interest rates might rise.
The S&P 500 index surged 61.61 points, or 2.3 percent, to 2,743.78, its biggest gain since March 26. The S&P 500 has gained 4.2 percent this week but would still need to rise another 6.8 percent to return to its record high from late September.
The Dow Jones industrial average jumped 617.70 points, or 2.5 percent, to 25,366.43. The Nasdaq composite rose 208.89 points, or 2.9 percent, to