Stocks rally as Fed chief Powell signals smaller hikes soon

The S&P 500 was set for a new milestone — its longest monthly winning streak since August 2021. Two-year yields — which are more sensitive to imminent Fed moves — erased their advance. The dollar fell.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said in the text of his speech. “Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.”

Officials have signaled they plan to raise their benchmark rate by 50 basis points at their final meeting of the year on Dec. 13-14, after four successive 75 basis-point hikes which have lifted it to a 3.75% to 4% target range.

Ahead of Powell’s remarks, Fed Governor Lisa Cook said it would be prudent for the central bank to make smaller hikes as it determines how high it will need to go to tame price gains.

Traders also scoured several economic reports, with key gauges of US activity painting a mixed third-quarter picture. Job openings fell in October — a hopeful sign for the Fed as it seeks to curb demand.

The figures precede Friday’s jobs report, which is currently forecast to show employers added 200,000 workers to payrolls in November. Economists are expecting the unemployment rate to hold at 3.7%, and for average hourly earnings to moderate.

“You’re still not in a recession yet, but growth is slowing, and you’re just seeing this volatility of trying to price this in. It’s a challenge,” Matt Miskin, co-chief investment strategist at John Hancock Investment Management, said at Bloomberg’s New York headquarters. “It’s like a traffic light going red-green, red-green.”

To Jeffrey Roach at LPL Financial, the labor market is probably still too tight for policymakers.

“The Fed will likely hike rates by 50 basis points in December and continue with additional hikes early next year before considering a pause,” Roach added.

Ronald Temple at Lazard Asset Management, noted that without more significant signs of slowing demand, traders look “excessively dovish” about the outlook for rates next year.

“The pivot is not as close as many hope,” he said.

Elsewhere, oil prices rallied after government data showed US stockpiles fell the most since 2019 while crude and product exports rose to record highs.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.