Wall Street rallies but trade choppy as investors digest Powell comments

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(In paragraph 6, correct the title to chief investment officer instead of deputy chief investment officer)


Dow up 0.78%, S&P 500 up 1.29%, Nasdaq up 1.90%


Microsoft on investment in AI


DuPont posts strong Q4 profit


Boeing up on layoff announcement

Feb 7 (Reuters) – U.S. stocks rose to a convincingly higher close on Tuesday, but trading was choppy as investors digested comments from Federal Reserve Chairman Jerome Powell on how much the central bank may need to suppress inflation.

Powell said that 2023 should be a year of “significant reduction in inflation.”

His comments renewed investor hopes for a less aggressive monetary policy that were shaken after a strong US jobs report last Friday. “We didn’t expect it to be this strong,” Powell said at the Economic Club of Washington, referring to the nonfarm payrolls report for January, but “it shows why we think this is going to be a process that will take some time.” -not a bad time.

“Powell expects that they will not cut rates anytime soon, but that there is a good path, that they are accomplishing what they need to accomplish,” said Shawn Cruz, chief trading strategist at TD Ameritrade.

Wall Street’s main indexes fluctuated wildly during and after Powell’s remarks, and analysts said the volatility was unlikely to dissipate soon.

“Until we see softening and inflation across the economy and around the world, it will be difficult to push markets up decisively,” said Carol Schleif, chief investment officer at BMO Family Office.

The tech-heavy Nasdaq rallied on news from Microsoft Corp, and the S&P 500 also got a boost. The company’s shares rose 1.29% as it unveiled an integration of ChatGPT, a chatbot from OpenAI, into its products.

After Powell’s comments, Morgan Stanley said it added 25 basis points to its forecast for the May policy meeting, but continued to expect the first rate cut of 25 basis points for December, 2023.

Last week, the Fed raised interest rates by 25 basis points, with markets now pricing in a top rate above 5% following Friday’s strong data on the -jobs.

Shares of US-listed Baidu Inc rose 12.18% as the Chinese search engine said it will conclude testing of its ChatGPT-style “Ernie Bot” project in March.

Most sectors on the S&P 500 ended higher. The energy sector is the top gainer as commodity prices rose more than 3% on Powell’s remarks. The technology and communication services sectors were also among the top gainers.

Among the top gainers on the Dow Jones Industrial Average, Boeing Inc rose 3.84% after the US planemaker confirmed it expects to cut about 2,000 white-collar jobs.

The Dow Jones Industrial Average rose 265.67 points, or 0.78%, to 34,156.69, the S&P 500 gained 52.92 points, or 1.29%, to 4,164 and the Nasdaq Composite added 226.34 points, or 1.9,1,13.

Volume on US exchanges was 11.98 billion shares, in line with the full session over the past 20 trading days.

On Monday, US stock indexes were dragged down by views that rates will stay higher for longer. Still, all three major averages are in the black for 2023, with the Nasdaq up more than 15%, led by a resurgence in battered mega-cap growth stocks.

So far, 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. Still, analysts expect fourth quarter earnings to decline 3.1%.

DuPont De Nemours Inc jumped 7.50% on a higher-than-expected quarterly profit supported by higher prices for its products.

Bed Bath & Beyond plunged nearly 50% as the home goods retailer sought to raise $1 billion in a last-ditch effort to avoid bankruptcy. The company completed the equity offering after the close of trading.

Later Tuesday, US President Joe Biden will deliver the annual State of the Union address to a joint session of Congress.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 1.68 to 1; on Nasdaq, a 1.42-to-1 ratio favored the advancers.

LS&P 500 posted 5 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 90 new highs and 31 new lows. (Reporting by Carolina Mandl in New York, Johann M Cherian and Shubham Batra in Bengaluru, additional reporting by Chuck Mikolajczak, in New York Editing by Anil D’Silva, Matthew Lewis and David Gregorio)

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