On Tuesday, the US stock market rallied to a convincingly higher close, but trade was choppy as investors digested comments from Federal Reserve Chair Jerome Powell about how long the central bank may need to tame inflation.
Powell said that 2023 should be a year of significant declines in inflation. After a strong US jobs report last Friday, he renewed investor hopes for less aggressive monetary policy. Powell said at the Economic Club of Washington, "We didn't expect it to be this strong, referring to the non-farm payrolls report for January, but it shows why we think this will be a process that takes quite a bit of time." Powell expects that they won't be cutting rates anytime soon, but there is a good path, that they are accomplishing what they need to accomplish, said Shawn Cruz, head trading strategist at TD Ameritrade.
Wall Street's main indexes fluctuated wildly during and after Powell's remarks, and analysts said volatility is unlikely to dissipate soon.
Carol Schleif, chief investment officer at BMO Family Office, said that it's going to be hard to push the markets up until we see softening and inflation throughout the economy and throughout the globe.
The tech-heavy Nasdaq rallied on news from Microsoft Corp, and the S&P 500 got a boost. The company's shares went up 1.29% as it unveiled its integration of ChatGPT, a chatbot from OpenAI.
Following Powell's comments, Morgan Stanley said it added 25 basis point to its forecast for the May policy meeting, but continued to expect the first 25 basis point rate cut for December, 2023.
The Fed raised interest rates by 25 basis points last week, with markets now pricing in a peak rate above 5% after Friday's strong jobs data.
US shares of Baidu Inc soared 12.18% as the Chinese search engine said it would finish testing of its ChatGPT-style project Ernie Bot in March.
The S&P 500's sectors ended higher. The energy sector was the top gainer as crude prices surged more than 3% on Powell's remarks. The technology and communication services sectors were among the top gainers.
Boeing Inc went up 3.84% compared to the Dow Jones Industrial Average after the US airlinemaker said it expects to cut about 2,000 white-collar jobs.
The Dow Jones Industrial Average went up 265.67 points, or 0.78%, to 34,156. The S&P 500 gained 52.92 points, or 1.29%, to 4,164 and the Nasdaq Composite added 226.34 points, or 1.9%, to 12,113, at 69. The US exchanges' volume was 11.98 billion shares, which was in line with the full session over the last 20 trading days.
The US stock indexes were dragged down by the belief that rates would stay higher for longer. All three major averages are still in the black for 2023, with the Nasdaq adding 15%, led by a revival in battered mega-cap growth stocks.
More than half of the companies on the S&P 500 have reported quarterly earnings, with 69.1% of them beating expectations, according to Refinitiv. Analysts expect fourth-quarter earnings to decline by 3.1%.
DuPont De Nemours Inc jumped by 7.50% on a higher than expected quarterly profit, supported by higher pricing for its products.
Bed Bath Beyond plunged by almost 50% as the home-goods retailer tried to raise $1 billion in a last-ditch effort to avoid bankruptcy. After the close of trading, the equity offering was completed.
Advancers were favoured by a 1.68 to 1 ratio, a 1.42 to 1 ratio on the NYSE, and a 1.42 to 1 ratio on the Nasdaq.
The S&P 500 posted 5 new 52 week highs and 2 new lows and the Nasdaq Composite recorded 90 new highs and 31 new lows.