U.S. stocks soared Wednesday afternoon as investors cheered comments from Federal Reserve Chair Jerome Powell that signaled a 50-basis-point rate hike in December.
In a highly anticipated speech at the Brookings Institution in Washington, Powell said it makes sense to "moderate the pace our rate increases" as the Fed heads toward its estimated peak in benchmark interest rates. Stocks surged after the text of Powell's speech was released.
The afternoon gains came after stocks finished lower on Tuesday, even as concerns regarding China’s strict zero-COVID policy abated. U.S.-listed Chinese stocks rose for the third day, adding to record rally this month as Beijing announced plans to accelerate vaccination of China’s elderly on Tuesday, spurring optimism among investors about a path forward for easing COVID restrictions amid nationwide protests.
The U.S. dollar was weaker Wednesday, while the yield on the benchmark 10-year Treasury note slipped. In oil markets, the global benchmark Brent crude (BZ=F) climbed 2.3% to $82.90 a barrel. WTI crude oil (CL=F) rose 2.6% on Wednesday to $80.25 a barrel.
For investors, though, Powell's speech, likely his final comments before the Fed's next rate setting meeting in mid-December, was the highlight of a jam-packed day in economic data points.
The speech also comes less than two weeks before the release of November’s consumer price data.
Strategists said the market has has already “priced in” the coming rate hike slowdown and higher terminal federal funds rate, both of which Powell had already hinted at in his early November conference.
"Every cycle is clearly different but with markets increasingly confident of a terminal rate around 5% and inflation getting back close to target in 2024, it’s worth remembering that exactly a year ago today, markets were pricing a Fed Funds rate of 0.68% by the end of 2022 and CPI of 2.6% (consensus of economists)," Jim Reid, Head of Thematic Research at Deutsche Bank, wrote in a note. "We will likely have an eventual miss of c.370bps and c.500bps, respectively."
Early in the day, investors studied another wave of macroeconomic data. The ADP employment report showed that private companies added 127,000 jobs for November, below expectations of about 200,000, in further signals of a cooling labor market.
“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,” Nela Richardson, chief economist at ADP, 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.”
Also on the data front:
US GDP for the 2022 third quarter increased at a 2.9% annual rate, according to a government estimate. The report also found that the Personal Consumption Expenditure (PCE) index, which measures the price of consumer goods and services, increased 4.3% in the quarter, an upward revision of 0.1 percentage point. Excluding food and energy prices, the PCE price index increased 4.6%, also revised up 0.1 percentage point.
US job openings fell to 10.33 million in October, down 10.68 from the prior month, according to the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey (JOLTS) survey. Economists surveyed by Bloomberg expected job openings to dip to 10.25 million on the month.
Signed contracts to buy existing homes in the U.S. fell 4.6% in October, the fifth consecutive decline as higher rates wane on demand, data from the National Association of Realtors showed Wednesday.
The Chicago Purchasing Managers Index (PMI) fell to 37.2, below expectations of 47.0, the lowest reading since reading since June 2020.
Finally, the Fed's Beige Book, a survey of the Fed's regional banks, found that economy grew steadily and inflation slightly eased while several businesses signaled "greater uncertainty or increased pessimism" around this year end's outlook.
Shares of CrowdStrike Holdings, Inc. (CRWD) sank more than 14% after the cybersecurity company’s forecasted quarter revenue came in short of analyst expectations as clients cut back on spending and delayed purchases due to macroeconomic headwinds. DoorDash (DASH) is laying off about 1,250 people in an effort to cut expenses, according to a report from Bloomberg, citing a memo from it CEO Tony Xu.
Also in corporate news, Workday (WDAY) shares rose 17% on Wednesday after the cloud-service company reported higher revenue for the quarter and lifted its subscription revenue guidance. Salesforce (CRM) stock plummeted after hours as the company said co-CEO Bret Taylor would step down early next year.
And in crypto news, Kraken is laying off 30% of its staff as the company cited that trading volumes have fallen "significantly." Kraken's move to downsize comes in the wake of FTX's collapse earlier this month.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv