Dow in bull market after Powell suggests rate hikes will ease

A trader hangs Christmas decorations on a trading post on the floor of the New York Stock Exchange on November 29.

US stocks exploded higher Wednesday. The Dow is now more than 20% above its 52-week low, which puts it in a new bull market. Federal Reserve chair Jerome Powell strongly suggested that the central bank is ready to slow its pace of interest rate hikes. Powell noted that the Fed is still concerned about inflation but that it also does not want to jeopardize the health of the labor market and broader economy either.

Wednesday’s rally helped push the markets to their second straight month of solid returns. The three major indexes wrapped up November with gains between 4% and 6%.

The Dow soared more than 735 points, or 2.2%

The S&P 500 rose 3.1%.

The Nasdaq Composite shot up 4.4%.

As stocks settle after the trading day, levels might still change slightly.

Federal Reserve chair Jerome Powell was flapping his inflation dove wings Wednesday. And Wall Street loved it.

Powell made it painstakingly clear that the Fed understands that it needs to be careful with future rate hikes to make sure it doesn’t send the economy spiraling into a recession.

The Dow popped more than 350 points, or 1.1%.

The S&P 500 rose 1.9%.

The Nasdaq Composite surged 3.2%. 

The Marriner S. Eccles Federal Reserve Board Building is seen on September 19 in Washington, DC.

The Federal Reserve’s Beige Book, which sums up economic anecdotes from the central bank’s dozen regional banks across the country, showed that there is growing evidence of moderating inflation.

“The pace of price increases slowed on balance, reflecting a combination of improvements in supply chains and weakening demand,” the Fed said in the Beige Book.

The Fed added that the job market still remains strong, as “employment grew modestly in most districts.” The continued tightness of the labor market may also help support the economy as well.

“Firms from many sectors reported preparations for a potential recession but also remain hesitant to lay off employees, given recent hiring difficulties,” the Fed said.

Close watchers of the Federal Reserve had a lot to take in Wednesday, between Jerome Powell’s speech, Q&A and the Beige Book.

Wall Street continued to cheer the more dovish comments from Federal Reserve chair Jerome Powell Wednesday. Stocks extended their gains after Powell wrapped up his prepared remarks at the Brookings Institution and answered questions about interest rates.

Powell said he still thinks there is a “path to a soft or softish” landing for the economy, a hope that the Fed will be able to choke off inflation without leading to a recession.

The Dow was up more than 250 points, or 0.8%.

The S&P 500 gained 1.4%.

The Nasdaq Composite rose 2.4%. 

Jerome Powell speaking at the Brookings Institution today in Washington, DC.

The Federal Reserve could pull back on the pace of its aggressive rate hikes as soon as December, Fed Chairman Jerome Powell said Wednesday at an economic forum.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” he said in remarks at the Hutchins Center on Fiscal and Monetary Policy, his last public appearance before the central bank enters a blackout period ahead of its December 13-14 policymaking meeting.

“Despite some promising developments, we have a long way to go,” Powell said, noting that the Fed has “not seen clear progress” on decades-high inflation plaguing the economy.

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Chair of the U.S. Federal Reserve Jerome Powell spoke at the Brookings Institution today in Washington, DC. Powell discussed the economic outlook, inflation and the labor market.

There was a lot of pressure on Federal Reserve Chair Jerome Powell to show that he and the rest of the Fed are still concerned about inflation but also ready to finally pull back on its historically aggressive pace of rate hikes. It looks like he just might have stuck the landing.

Stocks reversed course and turned higher in midday trading Wednesday after Powell said in a speech that “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.”

The Dow rose about 75 points, or 0.2%.

The S&P 500 gained 0.6%.

The Nasdaq Composite rallied 01.3%. 

Andrew Ross Sorkin and U.S. Secretary of the Treasury Janet Yellen speak during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center today in New York City. 

Treasury Secretary Janet Yellen called for greater oversight of crypto markets, citing the collapse of FTX as a wake-up call for regulators. 

“This is an industry that really needs to have adequate regulation, and it doesn’t,” Yellen told New York Times journalist Andrew Ross Sorkin at the DealBook Summit in New York.

The FTX fallout over the past few weeks “couldn’t provide a better illustration” of why regulatory gaps need to be closed. One upside of the implosion, Yellen said, is that it hasn’t spilled over to the banking sector.

The fall of FTX, the bankrupt crypto exchange founded by Sam Bankman-Fried, has put a harsh spotlight on the relatively lax oversight of the crypto industry, spurring calls for Congress and US financial regulators to do more to set rules in the often wildly speculative and volatile market for digital assets. 

Earlier Wednesday, Senator Sherrod Brown of Ohio, a longtime advocate of greater oversight of the industry, wrote a letter to Yellen urging her to work with lawmakers and regulators to crack down on crypto companies to prevent harm to investors and avoid contagion into traditional financial markets.  

“The failure of this crypto exchange brings to mind the litany of financial firm failures due to the combination of reckless risk taking and misconduct,” Brown wrote. 

“FTX’s business model combined three of the most common hazards in financial markets—leverage, illiquid holdings, and extreme concentration,” he added.

Brown pointed to recommendations in an October report from the Financial Stability Oversight Council, or FSOC, laying out proposed regulatory approaches for the industry.

“Single regulatory agencies currently generally do not have a comprehensive view of crypto asset entities’ activities,” Brown wrote. “I look forward to working on such legislation with you and the FSOC agencies.” 

Investors were anxiously waiting for Jerome Powell to give a speech about the economy, inflation and interest rates Wednesday afternoon. Stocks were mostly in the red ahead of the remarks.

Wall Street is looking for more clarity about future rate hikes. The market enjoyed a massive rally in October on hopes that the Fed would soon reduce the size of its interest rate increases. But stocks have been more volatile lately as investors fear that the Fed may still be nervous about inflation.

The Dow fell about 225 points, or 0.7%, in midday trading.

The S&P 500 dipped 0.3%.

The Nasdaq Composite was flat. 

Kraken, the third-largest crypto exchange in the world, will lay off about 30% of its staff, or 1,100 people, the company announced Wednesday.

Kraken CEO Jesse Powell said in a blog post that the company was adapting to “current market conditions.” The layoffs, he said, were necessary steps in the company’s attempt to “weather crypto winter.”

The crypto expansion over the past few years meant Kraken “had to grow fast, more than tripling our workforce,” Powell wrote. This year “macroeconomic and geopolitical factors have weighed on financial markets,” and severely limited that demand.

“I remain extremely bullish on crypto and Kraken,” Powell added.

Crypto exchanges have been experiencing more regulatory scrutiny and withdrawals since Sam Bankman-Fried’s FTX fell apart and filed for bankruptcy earlier this month.

The lending arm of crypto brokerage Genesis suspended redemptions and new loan originations earlier this month after an “abnormal” number of withdrawal requests that exceeded its current liquidity, citing market turmoil from the failure of FTX.

Bitfront, a crypto exchange backed by Japanese social media app Line, announced it would shut Tuesday down after failing to overcome turmoil in the industry.

The company said it had been unable “to overcome the challenges in this rapidly-evolving industry,” but distanced its decision from the implosion of FTX.

“Please note that this decision… is unrelated to recent issues related to certain exchanges that have been accused of misconduct,” it added.

Prices of digital currencies have plummeted. Bitcoin, the world’s biggest cryptocurrency, has fallen about 65% so far this year. It was trading at about $16,828 on Wednesday afternoon, according to CoinDesk.

A traveler walks along a moving walkway between terminals at Logan International Airport in Boston, the day before Thanksgiving, on Nov. 23.

People may no longer be as worried about Covid-19 when looking to take a trip. But surging prices have replaced the pandemic as a top concern for travelers.

“People are slightly reducing the length of trips,” said Axel Hefer, CEO of Trivago (TRVG), a European hotel and airline comparison site, to Alison Kosik on the CNN Business’ “Markets Now” show.

Hefer said that travel volume has come “under pressure” due to higher prices.

But people are still willing to go on trips. Hefer said Las Vegas, New York and Orlando remain popular destinations for tourists looking to vacation in the United States.

And Americans are still taking advantage of a stronger dollar and traveling to London, Dubai and Istanbul.

Federal Reserve Board Chairman Jerome Powell after the Fed raised interest rates by three-quarters of a percentage point as part of their continuing efforts to combat inflation, in Washington, on November 2.

Wall Street is hoping that the Federal Reserve is getting ready to slow down its pace of interest rate hikes. Investors are eagerly awaiting a speech from Fed Chair Jerome Powell later Wednesday. But one market expert is worried that the damage from existing rate increases have still yet to hit the economy.

“I personally believe the Fed has already done too much,” said David Rosenberg, founder and president of Rosenberg Research, to Alison Kosik on the CNN Business “Markets Now” show.

Rosenberg said he thinks there will be a recession in 2023, and he is concerned that stocks still have room to fall as a result.

“The Fed is not taking any prisoners, but what’s going to end up in jail is the economy,” he said, adding that there is “no get out of jail free card even with a mild recession.”

“You don’t get a mild bear market. You don’t get much of a recovery. You bounce along the bottom for long period of time,” he said.

Still, there could be some opportunities for investors…even faced with this backdrop. Gargi Chaudhuri, head of iShares investment strategy, Americas at BlackRock, told Kosik that investors should be looking for fixed income as a way to prop up their portfolios.

“We got used to this world of very close to zero interest rates,” Chaudhuri said, adding that “bonds are back.”

Chaudhuri said that thanks to the Fed, investors now need to “immunize our portfolios for higher inflation.”

Hackers are everywhere. Consumers and businesses need to be vigilant. So you’d think that companies in the burgeoning world of cybersecurity software would be thriving…despite worries about a broader economic slowdown. But that’s not the case.

CrowdStrike, a leading provider of cloud-based cybersecurity services, said in its latest earnings report after the closing bell Tuesday that while overall sales growth was still robust, customers are growing more cautious about what they are looking to spend.

“Increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates,” said CrowdStrike’s co-founder and chief executive officer George Kurtz in the earnings release.

Translation? Small businesses are taking longer to sign deals, and big companies want financial flexibility as well. Kurtz added during a conference call with analysts that “while sales cycles lengthen, we believe the vast majority of these deals are not lost, just delayed.”

Wall Street didn’t like the sound of that. Shares of CrowdStrike (CRWD) plunged 18% on the news.

The number of job openings in the United States dropped in October, but the labor market still remains historically tight despite the Federal Reserve’s efforts to cool demand and bring down inflation.

There were 10.3 million available jobs last month, down from nearly 10.7 million in September, according to the latest monthly Job Openings and Labor Turnover Survey (JOLTS) released Wednesday by the Bureau of Labor Statistics.

Economists had expected 10.3 million openings in October, according to consensus estimates on Refinitiv.

A container ship arrives at the Port of Oakland on October 24 in Oakland, California.

The US trade deficit jumped 7.7% to $99 billion in October and exports fell 2.6% to $173.7 billion, according to advance estimates released Wednesday by the Commerce Department.

It was the second consecutive month that the nominal-goods trade deficit widened, and exports are falling at a time of slower global economic growth and a stronger US dollar.

Within exports, consumer goods sank 9.4% and industrial supplies fell 4.7% from September.

“Trade will likely be modestly negative for growth through the rest of the year and in 2023 as slowing global growth and a deteriorating global economic outlook weigh on exports,” PNC senior economist Abbey Omodunbi said in a statement.

Wednesday’s report also showed that retail inventories decreased by 0.2% in October, indicating a pullback in consumer demand.

The goods trade deficit peaked at $125.6 billion in March and fell for five consecutive months before growing again in September and October, Omodunbi said.

Traders work on the floor at the New York Stock Exchange on Monday.

US stocks opened higher Wednesday morning as investors eagerly anticipate a speech by Federal Reserve Chair Jerome Powell on the state of the economy this afternoon. 

Wall Street was hit with two economic reports Wednesday that caused some volatility as investors interpreted how they might influence the Fed’s December policy decision. 

Payroll processing firm ADP said that private companies added 127,000 jobs in November, below the 190,000 consensus expectation. That signals the job market may be cooling and that the Fed could slow its historic rate-hiking campaign to fight inflation.  

Third-quarter GDP, however, was also revised higher signaling that the economy is still strong. The Bureau of Economic Analysis said Wednesday that third-quarter GDP increased at a 2.9% annual rate, up from the 2.6% initial estimate.

There are just 22 trading days left in the year and traders are still expecting a barrage of data this week including the government jobs report for November, job openings numbers, new housing data, and PCE inflation. 

The Dow gained 28 points, or 0.1%, on Wednesday morning.

The S&P 500 was up 0.2%.

The Nasdaq Composite was 0.4% higher. 

Shipping containers are stored at the Port Newark Container Terminal in Newark, New Jersey, on July 21.

The US economy grew much faster than expected in the third quarter, according to the latest gross domestic product report, which showed GDP rose by an annualized rate of 2.9%.

That’s an improvement from the initial government reading in October that showed 2.6% growth in economic activity, and better than the Refinitiv forecast of 2.7%. And it’s a marked turnaround from economic contractions of 1.6% in the first quarter of the year and 0.6% in the second.

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A stronger-than-expected GDP report weighed on Wall Street investors worry the Federal Reserve may have room to raise rates for quite some time.

US GDP for the third quarter came in at a 2.9% seasonally adjusted annual rate.

Dow futures fell 14 points. S&P 500 futures were mostly unchanged and Nasdaq futures were slightly higher. Stock futures were all lower than before the report.

A woman walks her dog past a Petco store for animal supplies in a popular shopping area in Santa Monica, Calif. in May 2020.

Inflation may be causing consumers to make some difficult choices about how they spend their money. But make no mistake. People are continuing to splurge on their pooches, kitties, birds, fish, hamsters and other furry family members.

Petco, a leading pet supplies retailer and health and wellness company for pets, reported a 4% jump in sales from a year ago, slightly topping Wall Street’s forecasts. Petco also issued bullish guidance for the rest of the fiscal year.

The strong results “demonstrate the resilience of the pet category through economic cycles,” said Petco CEO Ron Coughlin in the earnings release. Coughlin added that “pet parents continue to prioritize the health and wellness of their pets.”

Shares of Petco (WOOF) surged nearly 17% on the news Wednesday. Online pet supplies giant Chewy (CHWY), which will report earnings on December 8, gained about 2%.

But both stocks have actually plunged this year due to worries that pet owners might be pulling back on spending. Petco’s solid sales could reassure Wall Street that this may not be the case after all.

Commuters arrive into the Oculus station and mall in Manhattan on November 17 in New York City.

The US private sector added 127,000 jobs in November, the slowest monthly job gains since January 2021 as high interest rates cooled off portions of the red-hot labor market, according to a report issued Wednesday by payroll processing giant ADP.

The monthly gains, which are well below economists’ expectations of 200,000, indicate that the long-tight labor market is starting to loosen, said Nela Richardson, ADP’s chief economist.

“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains,” she said in a statement. “In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”

Bacon, SPAM, chili and Skippy peanut butter may be good comfort food. But there’s nothing comforting about the latest results and outlook from Hormel. Sales fell 5% from a year ago, missing forecasts. Hormel also issued downbeat guidance for its next fiscal year.

“We expect to operate in a volatile, complex and high-cost environment again in fiscal 2023,” said Hormel chairman, president and CEO Jim Snee in the earnings release.

Shares of Hormel (HRL) fell about 4% in premarket trading on the news. The stock is only down slightly this year though. Investors have flocked to safe haven food companies, believing that they could be good hedges against inflation. Rivals ConAgra (CAG), Mondelez (MDLZ), Campbell Soup (CPB) and Kellogg (K) have also fared well in 2022.