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Dow gains 300 points as optimism grows after Powell signals smaller rate hikes ahead

Investors should focus on stocks with earnings resiliency, says Morgan Stanley's Sherry Paul

Stocks climbed Wednesday as Federal Reserve Chair Jerome Powell confirmed that the central bank will slow the pace of its aggressive rate-hiking campaign that has weighed on markets.

The Dow Jones Industrial Average was up 318 points, or 0.9%. Meanwhile, the tech-heavy Nasdaq Composite jumped 2.9%. The S&P 500 added 1.8%.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in a speech at the Brookings Institution in Washington, DC. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

But overall stock gains were muted as Powell did caution the Fed may stay with restrictive policy for a long time before it ends its inflation fight.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said.

Powell’s comments bolstered growing optimism among some investors that the Fed will deliver a smaller 0.5 percentage point rate hike at its next meeting after four consecutive 0.75 percentage point increases to tame high inflation. Any signal of a pivot on future rate hikes would likely send markets higher.

“Investors are looking for that rock of certainty – something to hang your hat on for greater predictability of where the Fed’s going with interest rates,” said Greg Bassuk, CEO of AXS Investments. “The messaging that the pace of rate increases can begin slowing as early as December was that rock.”

The 10-year Treasury yield eased a bit on the news.

Wednesday’s jumps give 11th-hour steam to growth already seen by the indexes over the course of November. With just hours left of trading, the Dow and S&P 500 are both set to end the month up more than 4% and 3%, respectively, while the Nasdaq Composite is on track to gain 2.4%.

Read More: Dow gains 300 points as optimism grows after Powell signals smaller rate hikes ahead

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