Stocks climbed Wednesday to send Wall Street to its best level since the summer following the latest hike to interest rates by the Federal Reserve, which said it’s finally seeing improvements in inflation. The S&P 500 rallied back from an early 1% loss to finish 1% higher 4,119.21 after Fed Chair Jerome Powell said the economy is on the path toward getting inflation lower, the AP reports. The Dow Jones Industrial Average erased a drop of 500 points to rise 6.92 points, or less than 0.1%, to 34,092.96 , while the Nasdaq composite jumped 231.77 points, or 2%, to 11,816.32. As expected, the Fed raised its benchmark interest rate by 0.25 percentage points to its highest level since late 2007. It’s the smallest such increase in the Fed’s blizzard of rate hikes since March.
What’s more important for markets is where interest rates are heading next. Much of Wall Street is hoping that cooling inflation since the summertime means the Fed may raise rates just a bit more, before taking a pause and then possibly cutting rates toward the end of the year. Rate cuts can ease pressure on the economy and juice investment prices. Powell did reiterate Wednesday that "ongoing increases" in interest rates will be needed to bring down inflation to the Fed’s target level. And he said it was still way too early to declare victory over inflation. But he also said, "We can now say, I think for the first time, that the disinflationary process has started." That got Wall Street thinking about a future with no more rate increases.
A lackluster earnings reporting season also continues on Wall Street, with more mixed profit reports arriving from big US companies. Electronic Arts tumbled 9.3% after it gave forecasts for upcoming results that fell short of Wall Street’s expectations. Analysts said some gamers may be getting more selective given the softening economy. On the winning side was Advanced Micro Devices, which rose 12.6% even though its profit tumbled 98% in the fourth quarter from a year earlier. Its results were better than analysts expected.
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