The Dow Jones Industrial Average closed up 618 points on Wednesday, its best one-day gain since March (per CNBC), while both the S&P 500 and the Nasdaq Composite rose over 2% following a highly anticipated speech by Federal Reserve Chairman Jerome Powell in New York.
The big picture: There's no single reason for markets' surge, but some market-watchers say investors misinterpreted Powell's comment that interest rates were "just below" the neutral level to mean fewer interest rate hikes were on the horizon.
What they're saying:
- Jared Bernstein, who served as chief economist under Vice President Joe Biden:
Jeez...Dow up 500+ points cuz Powell said funds rate is just below the Fed's "broad range" of estimates of neutral. Given that the effective policy rate is 2.2% & the low end of range is 2.5%, this is factually equivalent to his saying today is Wednesday. Which it is (I checked).
— Jared Bernstein (@econjared) November 28, 2018
- Ian Shepherdson, chief economist at Pantheon Macroeconomics:
1. Markets think Chair Powell said rates are now "just below" neutral. What he actually said was that rates are "just below the broad range of estimates of the level that would be neutral". This is just a simple statement of fact...
— Ian Shepherdson (@IanShepherdson) November 28, 2018
- Marc Chandler, chief market strategist at Bannockburn Global:
FWIW...Mkt seems purposely to misinterpret Powell's comments. Not just below neutral as many say they heard, but below broad range of estimates of neutral level, which Sept SEP saw as 2.5%-3.5%. No sign that bottom of range appropriate Powell not signaling one and done.
— Marc Chandler (@marcmakingsense) November 28, 2018
- Gregory Daco, chief U.S. economist at Oxford Economics, tweeted, in part that it was "not correct" that markets saw Powell's comments has a signal that the Fed will no longer hike interest rates after December.
The other side:
- Joe LaVorgna, chief economist for the Americas at Natixis:
#Powell comment that he sees solid #economic growth with #interestrates “just below” neutral suggests to me that the #Fed #FOMC could pause after next month’s rate hike
— Joseph A. LaVorgna (@Lavorgnanomics) November 28, 2018
