Tech stocks have been a bad bet for most of 2022, but on Wednesday afternoon, after Federal Reserve Chairman Jerome Powell confirmed Wednesday that smaller interest rate increases are likely ahead and could start in December, Facebook parent Meta Platforms was recently up more than 7%. Apple gained nearly 5%. Netflix shares shot up about 9%, on track to be the top gainer in the S 500. And Google parent Alphabet rose 5%. All four stocks are still down on the year.
Echoing recent statements from other central bank officials and comments at the November Fed meeting, Powell said he sees the central bank in position to reduce the size of rate hikes as soon as next month.
But he cautioned that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.
“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.
The chairman noted that policy moves such as interest rate increases and the reduction of the Fed’s bond holdings generally take time to make their way through the system.
“Thus, 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,” he added. “The time for moderating the pace of rate increases may come as soon as the December meeting.”
Wall Street applauded the remarks. The Dow Jones Industrial Average closed up 628 points, or 2.17%, to snap a three-session losing streak. Tech stocks fared even better, with the Nasdaq Composite roaring 4.4% higher.
MacDailyNews Take: As Powell also said, short-term data can be deceptive and more consistent evidence that inflation is ebbing and the job market loosening is required.
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