Wall Street surges on hints of fewer rate hikes, dollar falls

NEW YORK (Reuters) – Comments by Federal Reserve Chair Jerome Powell that benchmark U.S. interest rates were “just below” neutral sparked a sharp rally on Wall Street on Wednesday, easing investor worries about the pace of rate hikes by the U.S. central bank next year.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., November 26, 2018. REUTERS/Brendan McDermid

Hopes that the United States and China could call a trade war ceasefire at the upcoming G20 summit in Argentina also boosted stocks around the globe.

Meanwhile, the dollar retreated with potentially fewer rate increases on the horizon, and sterling rose after the Bank of England said the British economy could shrink by as much as 8 percent in about a year after a no-deal Brexit.

Equity investors reacted favorably to Powell’s comments, which indicated there may not be as many rate hikes from the Fed in the future as initially anticipated.

“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.”

U.S. President Donald Trump has recently been critical of the Fed for raising rates.

The Dow Jones Industrial Average rose 617.7 points, or 2.5 percent, to 25,366.43, the S&P 500 gained 61.61 points, or 2.30 percent, to 2,743.78 and the Nasdaq Composite added 208.89 points, or 2.95 percent, to 7,291.59.

The pan-European STOXX 600 index was down 0.01 percent and MSCI’s gauge of stocks across the globe gained 0.08 percent.

Earlier, hopes for a U.S.-China truce on trade had also helped lift equities.

Despite Trump’s tough remarks on the trade dispute ahead of Saturday’s meeting with Chinese President Xi

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