Asian shares gain after Fed chair signals slower rate hikes

On Wednesday, Fed Chair Jerome Powell, said in comments at the Brookings Institution that the central bank could begin moderating its pace of rate hikes as soon as December, when its policymaking committee will hold its next meeting.

Stocks roared higher. The benchmark S&P 500 rose 3.1%, snapping a three-day losing streak and closing at 4,080.11. The Dow Jones Industrial Average gained 2.2% to 34,589.77 and the Nasdaq composite climbed 4.4% to 11,468.

Small company stocks also rallied. The Russell 2000 index rose 2.7% to 1,886.58.

More than 95% of the stocks in the S&P 500 advanced, led by technology companies. Apple rose 4.9% and Microsoft jumped 6.2%.

“The optimism in the market is that perhaps the worse is over for the U.S. in terms of inflation reading, and the Fed isn’t going to increase the interest aggressively," Naeem Aslam of Avatrade said in a commentary.

Powell’s comments sent Treasury yields sharply lower. The yield on the 10-year Treasury dropped to 3.62% from 3.75% late Tuesday. The yield on the two-year note, which tends to track market expectations of future Fed action, fell to 4.34%. It was trading at 4.48% late Tuesday and had been as high as 4.53% shortly before Powell’s speech.

While citing some recent signs that inflation is cooling, Powell stressed that the Fed will push rates higher than previously expected and keep them there for an extended period to ensure inflation comes down sufficiently.

“History cautions strongly against prematurely loosening policy,” Powell said. “We will stay the course until the job is done.”

Major indexes have been unsteady all year as the economy and financial markets dealt with stubbornly hot inflation and the Fed's attempt to cool high prices with aggressive interest rate increases.

Wall Street has been hoping that the Fed will slow the scale and pace of its interest rate hikes. It has raised its benchmark interest rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. The goal is to make borrowing more costly and generally slow the economy in order to tame inflation.

Higher mortgage rates have caused home sales to plunge and higher interest rates also have raised costs for most other consumer and business loans.

The economy has been slowing, and many economists expect the U.S. to slip into a recession next year. But there are strong pockets of growth. The government said Wednesday that the economy expanded at a 2.9% annual rate from July through September, an upgrade from its initial estimate.

Consumers have continued spending, despite inflation squeezing wallets. Overall, employment remains strong, though job openings dropped in October more than economists had anticipated and human resources company ADP reported an easing in private sector hiring in November.

Investors will get more data Thursday on the employment sector with a report on weekly unemployment claims. The closely watched monthly report on the job market will be released on Friday.

In other trading Thursday, U.S. benchmark crude oil lost 41 cents to $80.14 a barrel in electronic trading on the New York Mercantile Exchange. It climbed 3% on Wednesday.

Brent crude, the pricing basis for international trading, shed 54 cents to $86.43 a barrel.

The U.S. dollar fell to 136.32 Japanese yen from 138.09 yen. The euro rose to $1.0454 from $1.0409.