Major indexes rose after Powell’s speech

The Dow Jones Industrial Average climbed 265.67 points or 0.78% to finish at 34,156.69. The S&P 500 leaped 1.29%, completing at 4,164.00 points. The Nasdaq Composite published its biggest daily gain, rising 1.9% to close at 12,113.79.

Major indexes dropped during and shortly after chair Powell’s remarks in a midday talk at The Economic Club of Washington, D.C.

The Dow earned more than 275 points at one point. Meanwhile, the S&P 500 and Nasdaq Composite climbed higher than 1%. Investors liked Powell’s comments on disinflation, hoping they meant the central bank would slow its rate hike campaign.

According to Powell, the process of disinflation, the process of lowering inflation, has started in the goods sector. But there is a long way to go. These are significantly early phases of disinflation.

Later in the debate, Powell said the Fed could have to raise interest rates more quickly, which could make investors nervous. The indexes briefly went negative after Powell’s remarks. However, they settled in the green.

Powell said that the reality is they’re going to act on the data. If they continue to get strong labor market reports or higher inflation reports, it could be that they have to do more and raise rates more than anticipated.

Fed’s decision is in question

According to Dave Grecsek, director of the investment strategy and research at Aspiriant, the market is trying to try to rule out two very different scenarios, both of which are driven by what the Fed will do. It’s an either-we-get-a-recession-or-we-don’t scenario, and that’s very much the envy, in the eyes of the market, of how quickly the Fed is approaching the end of its rate hike campaign.

His comments on Tuesday followed Powell’s press conference last week after the Fed raised interest rates, where he said the central bank believed it was making solid progress in reducing inflation. Investors viewed the comments as dovish and sent shares soaring.