The DJIA advanced 183.15 points, or 0.51%, to 36,252.02, the S&P 500 added 42.78 points, or 0.92%, to 4,713.07 and the Nasdaq Composite gained 210.62 points, or 1.41%, to 15,153.45
U.S. stock indexes gained ground on Tuesday with Nasdaq leading the advance as investors were relieved that Federal Reserve Chair Jerome Powell’s testimony to Congress did not include any major surprises.
Federal Reserve Chair Jerome Powell, in a congressional hearing that pointed to his likely confirmation for a second term in the job, said the U.S. central bank, was determined to ensure high inflation did not become ‘entrenched.’
But he added that rather than diminishing job growth, the Fed’s tightening plans which include higher interest rates and a reduction in its asset holdings were necessary to maintain the economic expansion.
After falling just 1% earlier in the day, the interest rate sensitive technology sector bounced back and brought the broader indexes with it. Technology-laden Nasdaq closed up 1.4% marking its biggest daily gain so far this year.
Powell’s comments likely reassured investors that the Fed was not going to prioritize inflation reduction above everything else, including employment, said Shawn Cruz, senior manager of trader strategy at TD Ameritrade in Chicago.
The initial concern was the Fed would upset the pace of the recovery, said Cruz. But the investor takeaway from Tuesday’s testimony was that he’s not just going to try and crush inflation without regarding the other effects that could have on the economy.
Investors had been selling stocks since Jan. 5 when December meeting minutes showed Fed officials discussing how ‘very tight’ job market and unabated inflation might require interest rate hikes sooner than expected and a reduction of the Fed’s overall asset holdings as a second brake on the economy.
While investors will anxiously watch inflation data due out on Wednesday, Cruz notes that they are already prepared for an elevated number with consensus forecasts for a 7% increase on a year-on-year basis for the headline Consumer Price Index (CPI).
Core CPI, which excludes food and energy prices, is seen rising by 5.4%, according to economists polled by Reuters.
The Dow Jones Industrial Average advanced 183.15 points, or 0.51%, to 36,252.02, the S&P 500 added 42.78 points, or 0.92%, to 4,713.07 and the Nasdaq Composite gained 210.62 points, or 1.41%, to 15,153.45.