Marketbites: Powell Spurs Rally
Portfolio Manager Commentary:
Stocks saw broad gains Wednesday after Jerome Powell confirmed that the central bank will slow the pace of its aggressive rate-hiking campaign that has weighed on markets. Some economic data landed ahead of Mr. Powell's afternoon speech. Third-quarter U.S. GDP was revised higher than economists expected, while ADP said November U.S. private-sector job growth slowed from October's level.
“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, D.C. “The time for moderating the pace of rate increases may come as soon as the December meeting.” Still, Powell cautioned the Fed may stay with restrictive policy for a long time before it ends its inflation fight.
Chart of the Day:
Investors are driving a modest end-of-year rally in junk bonds, erasing some of 2022’s biting losses in a bet that the economic outlook for next year has stabilized. Bonds across the board have been slammed this year by the Federal Reserve’s efforts to contain inflation, which has fueled the steepest series of interest-rate increases in decades. Inflation and higher rates undercut the value of bonds’ fixed stream of payments to investors, sending bond prices lower and yields higher.