US stocks finished strongly on Tuesday, but trade was rough as traders digested remarks from Federal Reserve Chair Jerome Powell about how long the central bank might need to keep inflation under control.
Powell predicted that this year would be a year of “significant declines in inflation.”
After a strong U.S. jobs report last Friday, his comments reignited investor hopes for less competitive monetary policy which wavered. Powell said at the Economic Club of Washington, “We didn’t expect it to be this strong,” describing the nonfarm payrolls report for January, but it “shows why we think this will be a process that takes quite a bit of time.”
Shawn Cruz, head trading strategist at TD Ameritrade informed, “Powell expects they’re not going to be cutting rates anytime soon, but that there is a good path, that they’re accomplishing what they need to accomplish.”
Wall Street’s main indexes oscillated wildly during and after Powell’s remarks, and analysts said volatility is unlikely to soon vanish.
Carol Schleif, Chief investment officer at BMO Family Office, voiced “Until we see softening and inflation throughout the economy and throughout the globe, it’s going to be hard to push the markets up in a decisive fashion.”
The Nasdaq (.IXIC) and the S&P 500 (.SPX) both escalated on news from Microsoft Corp. (MSFT.O). The stock rose 1.29% after the company announced the incorporation of ChatGPT, an OpenAI chatbot, into its products.
Following Powell’s remarks, Morgan Stanley increased its forecast for the May policy meeting by 25 basis points but maintained its expectation for the first 25 basis point rate cut in December 2023.
The Fed hiked interest rates by 25 basis points last week, and markets are now pricing in a peak price above 5% following Friday’s strong job data.
U.S.-listed shares of Baidu Inc. went up 12.18% after the Chinese search engine announced that it would wrap up testing of its ChatGPT-style project “Ernie Bot” in March.
Most sectors on the S&P 500 ended higher. The top gainer was the energy sector (.SPNY) since crude prices soared more than 3% on Powell’s remarks. The top gainers also included the technology (.SPLRCL) and communication services (.SPLRCT) sectors.
One of the top gainers from Dow Jones Industrial Average’s (.DJI) was Boeing Inc (BA.N) , rising 3.84% after confirming plans to lay off 2,000 white-collar workers.
The Dow Jones Industrial Average (.DJI) jumped 265.67 points, or 0.78%, to 34,156.69; the S&P 500 (.SPX) won 52.92 points, or 1.29%, to 4,164; and the Nasdaq Composite (.IXIC) added 226.34 points, or 1.9%, to 12,113.79.
Volume on U.S. exchanges was 11.98 billion shares, consistent with the full session over the last 20 trading days.
On Monday, U.S. stock indexes plunged by expectations that interest rates would remain high for a longer period of time. Nonetheless, all three major averages are positive for 2023, with the Nasdaq adding more than 15%, led by an improvement in battered mega-cap growth stocks.
Thus in accord with Refinitiv, more than the majority of the S&P 500 companies have reported quarterly revenue, with 69.1% exceeding expectations. Still, analysts hope fourth-quarter earnings will dip by 3.1%.
DuPont De Nemours Inc (DD.N) soared 7.50% on a higher-than-expected quarterly profit supported by increasing prices for its goods.
Bed Bath & Beyond (BBBY.O) fell almost 50% as the home-goods retailer sought to raise $1 billion in a last-ditch effort to avert bankruptcy. Following the close of trading, the company completed its equity offering.
U.S. President Joe Biden will read the annual State of the Union address to a joint session of Congress, later on Tuesday.
Advancing issues outnumbered falling ones by a 1.68-to-1 ratio on the NYSE; on the Nasdaq, a 1.42-to-1 ratio preferred advancers.
The S&P 500 recorded five new 52-week highs and two new lows, while the Nasdaq Composite placed 90 new highs and 31 new lows.