November 29 US stock indexes had rallied more than 1.5 per cent on Wednesday after Federal Reserve Chairman Jerome Powell said the policy rate was ‘just below’ neutral, easing worries of a faster pace of interest rate hikes next year.
The Fed’s gradual interest-rate hikes are meant to balance risks as it tries to keep the economy on track, Powell said, but offered few clues on how much longer the US central bank would raise interest rates in the face of a global slowdown and market volatility at home.
“He’s now acknowledging he’s close to neutral, which suggests maybe not quite as many rate hikes in the future as investors believed. It’s certainly a change of language and welcome news to investors,” said Jack Ablin, chief investment officer at cresset wealth advisors in Chicago.
“It makes the value of risk aversion less attractive, so it makes risk taking, such as stock investments, more attractive.”
Ten of the 11 major S&P sectors were higher, with the technology sector’s 2.45 per cent rise leading the gains. Yields on two-year Treasury, which reflect traders’ expectations of interest rate hikes, fell while longer-dated federal fund futures ticked higher, suggesting diminished expectations for interest-rate hikes after December 2018.
Financials rose 1.2 per cent, boosted by gains in US lenders, including JPMorgan Chase & Co, Morgan Stanley, Goldman Sachs Group Inc , Wells Fargo & Co and Bank of America Corp.
Earlier in the day, the central bank, in a first-ever report devoted to financial stability, said trade tensions, Brexit discussions, trouble in China and emerging markets could rock a US financial system where asset prices are “elevated” and business credit quality may be “deteriorating’’.
At 12:49 a.m. EDT the Dow Jones Industrial Average was up 477.47 points, or 1.93 per cent, at 25,226.20, the S&P