Wall Street followed international shares to a higher close on Wednesday as the benchmark U.S. Treasury yield fell to a one-month low after Federal Reserve Chair Jerome Powell reassured investors that rate cuts are coming this year despite rising inflation.
All three major U.S. market indexes closed below session highs, recovering from Tuesday's sharp sell-off. The tech-heavy Nasdaq gained the most. The House Financial Services Committee heard Powell say "if the economy evolves broadly as expected," the central bank will drop its benchmark rate this year. Continuing inflation reduction "was uncertain."
He also said the Fed was on a "good path" to a soft landing via controlling inflation and avoiding economic collapse. No short-term recession danger exists for the U.S. economy, he added. Powell will conclude his two-day hearing on Thursday before the Senate Banking Committee.
"Powell didn’t rock the boat," said Carson Group Omaha chief market strategist Ryan Detrick. "He made it clear cuts likely will come later this year and at the same time the economy remains on firm footing." There was relief that he appeared hawkish, Detrick said.
European markets reached a record high as investors analyzed Powell's comments the day before the ECB's policy meeting. Before Friday's February employment report, labor market data revealed job vacancies fell in the first weeks of 2024 and private firms gained fewer people than projected in February.
To lower inflation to the Fed's 2% target, Powell says the U.S. labor market must soften. The Dow Jones Industrial Average (.DJI) rose 75.86 points, or 0.2%, to 38,661.05, the S&P 500 (.SPX) jumped 26.11 points, or 0.51%, to 5,104.76, and the Nasdaq Composite (.IXIC) increased 91.96 points, or 0.58%, to 16,031.54. The pan-European STOXX 600 index (.STOXX) rose 0.39% while MSCI's global stock index (.MIWD00000PUS) jumped 0.59%.
Emerging market stocks climbed 0.67%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.78%, while Japan's Nikkei (.N225) fell 0.02%. Bitcoin rose again after touching and then retreating from an all-time high on Tuesday. Last, the cryptocurrency rose 5.6% to $66,884.
US 10-year Treasuries yielded a one-month low. Ten-year notes jumped 8/32 to 4.1078% from 4.137% late Tuesday. From 4.274% late Tuesday, the 30-year bond climbed 18/32 to 4.2406%. A smaller-than-expected growth in U.S. crude supplies and Powell's rate cut pledges lifted oil prices. U.S. crude rose 1.25% to $79.13 a barrel, while Brent rose 1.12% to $82.96. Gold rose to a record high for the second day on U.S. monetary easing bets. Gold rose 0.9% to $2,146.29 an ounce.
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