Powell emphasized on Wednesday his expectation for the Fed to slash rates, stating the US economy was far from facing a recession. However, he refrained from setting a specific timeline for the rate reductions, mentioning that concrete progress on inflation was necessary before such actions could be considered.
In his prepared comments before congressional testimony, Powell highlighted that inflation had “eased substantially” since peaking at 40-year highs in 2022, yet he maintained that greater confidence was needed in its decline prior to enacting rate cuts.
“He was clear that the Fed does see rate cuts coming this year. That’s what the markets needed to hear. Was it couched in some ambiguous terms? Yes, but overall the message was clear,” noted Quincy Krosby, LPL Financial’s chief global strategist. “It’s not if but when the Fed initiates a rate easing policy.”
Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, added that alongside Powell’s testimony, the latest economic data bolstered expectations for forthcoming rate cuts and strengthened confidence in the labor market.
The reported increase in US private payrolls for February was slightly below forecasts. Additionally, the Job Openings and Labor Turnover Survey (JOLTS) indicated a slight decrease in job openings in January, with a concurrent drop in hiring, suggesting a gradual relaxation of labor market conditions.
“The number of job openings shriveled a bit, but are still quite healthy and indicative of a labor market that is still looking pretty stout,” Luschini remarked. “It fits the Goldilocks narrative that’s become consensus.”
Investors are now awaiting Friday’s nonfarm payrolls report for further insights into the labor market’s condition.
On the market front, the Dow Jones Industrial Average rose by 76.32 points, or 0.2%, closing at 38,661.51. The S&P 500 and Nasdaq Composite also saw gains, increasing by 0.51% and 0.58% respectively.
The rebound followed a turbulent Tuesday where Wall Street’s major indexes lost over 1%, largely due to a downturn in megacap stocks and market jitters preceding Powell’s remarks.
In the tech sector, semiconductor companies rallied, recovering from previous losses, while Tesla faced a continued decline over concerns regarding its first-quarter earnings.
JD.com’s US-listed shares saw an uptick following a fourth-quarter revenue report that exceeded expectations, accompanied by an expanded share repurchase program. Similarly, stocks linked to cryptocurrencies like Coinbase Global and MicroStrategy observed gains, alongside a significant rise in CrowdStrike Holdings shares after the firm’s optimistic annual forecast.
As Wall Street navigates through these economic signals, the focus remains on balancing job growth with inflation control, a scenario pivotal for the Fed’s decision-making on interest rates.
(With inputs from agencies)