The dollar recorded declines, while US equities climbed, as investors were betting that the US Federal Reserve would slow down its aggressive rate hikes, after Wednesday’s announcement of an expected increase of 75 basis points.
Lower inventories of oil in the United States pushed up oil futures, while concerns about higher interest rates and weaker demand were offset by the reduction in Russian gas supplies to Europe.
There was volatility seen in 10-year Treasury yields, but they were able to trim most of their gains after the comments of Fed Chairman Jerome Powell, following the conclusion of the central bank’s meeting.
The Fed has been hiking interest rates aggressively to tame red-hot inflation that had last climbed this high in the 1980s.
The US central bank said that they may still increase interest rates, even though there was growing evidence that the economy had begun to slow down.
Powell said that there was a possibility they would slow the pace of the hikes, as the rates become more restrictive and they want to hit moderately-restrictive levels by the end of the year.
He also said that due to the uncertainty about the economy’s future, they could only give forward guidance on the basis of meeting to meeting.
Some analysts pointed out that the chairman’s lack of guidance about the rate hike in September and talk about a slowdown were hints of a dovish stance.
After the Fed’s announcement, most asset classes had recorded declines, but there was a sharp rise in stocks after the chairman’s comments and Treasury yields also fell before making a recovery.
A 1.37% increase saw the Dow Jones Industrial Average rise by 436.05 points to reach 32,197.59, while a 2.62% increase in the S&P 500 took it 102.56 points higher to reach 4,023.61.
A 4.06% advancement in the Nasdaq Composite saw it go up by 469.85 points to reach 12,032.42. There was also a 1.71% gain in the MSCI’s gauge of world stocks.
Market experts said that the comments of the chairman indicated that the rate hike would slow down in the coming months.
This was because real economic growth was slowing down and this would mean that inflation would eventually come down, requiring less interest rate hikes.
There was a 0.26% rise in the Japanese yen against the US dollar, as it reached 136.58, while a 1.06% gain was also seen in the British pound, which saw it reach $1.2153 for the day.
On Wednesday, the market also got a boost due to the earnings reports of Alphabet Inc. and Microsoft Corp., which resulted in a rally in the technology sector and growth shares.
These have been the hardest hit this year and the results gave investor confidence in Big Tech a boost about its ability to navigate a recession.
However, the fragile energy situation in Europe weighed on the mood, as gas supplies on Wednesday were further reduced via the Nord Stream 1 pipeline.