U.S. stocks traded modestly higher on Tuesday afternoon after a volatile session in the wake of Federal Reserve Chair Jerome Powell’s comments that inflation will decline significantly in 2023, though more interest-rate hikes will be necessary. What’s happening
The Dow Jones Industrial Average
DJIA,
+0.40%
was up 61 points, or 0.2%, to 33,949.
The S&P 500
SPX,
+0.84%
gained 21 points, or 0.5%, to 4,132.
The Nasdaq Composite
COMP,
+1.25%
rose 103 points, or 0.9%, to 11,991.
On Monday, the Dow Jones Industrial Average
DJIA,
+0.40%
fell 35 points, or 0.1%, to 33,891, the S&P 500
SPX,
+0.84%
declined 25 points, or 0.61%, to 4,111, and the Nasdaq Composite
COMP,
+1.25%
dropped 120 points, or 1%, to 11,887.
What’s driving markets U.S. stock indexes swung in choppy trade following Fed Chair Powell’s remarks during an interview with David Rubinstein, the co-chairman of private-equity giant The Carlyle Group, at the Economic Club of Washington, D.C. “The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,” said Powell. “But it has a long way to go. These are the very early stages.” The three major U.S. stock indexes at first posted gains, then swung to losses before rallying again after Powell reiterated that more interest-rate hikes will be necessary, and surprisingly strong economic data like last Friday’s employment report could force the central bank to raise its policy interest rate more than investors have priced in. “The reality is we’re going to react to the data, so if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have do more and raise rates more than is priced in,” Powell said. See: Powell says jobs report shows Fed needs to keep raising rates, but he expects ‘significant’ slowdown in inflation Last week, the U.S. Labor Department reported a 517,000 surge in nonfarm payrolls, as well as a drop in the unemployment rate to 3.4%. Traders projected an over 70% probability that the rate will peak at 5-5.25% by May, followed by almost 50 basis points of cuts by the end of 2023, according to the CME’s FedWatch tool. “Today’s comments do nothing to undermine the recent strength in the market,” said David Russell, vice president of market intelligence at TradeStation. “They also seem to keep us on track for another 25 basis points in March, with possibly no more increases after that. It’s a potential Goldilocks environment for the bulls and a very tough spot for the bears.” In the news conference following the FOMC decision last Wednesday, Powell acknowledged for the first time that “the disinflationary process” is under way. Yet he admitted the Fed needs to see “substantially more evidence” that price pressures are evaporating. However, Russell said Powell’s remarks on Tuesday means he refrained from walking back his disinflation comment. “If anything, he reiterated it …