U.S. stocks and bonds rallied on Wednesday, much to the chagrin of traders who had ramped up bearish bets on the expectation that Federal Reserve Chairman Jerome Powell would push back against the market’s latest advance.
It’s very possible, market strategists said, citing Powell’s remarks about financial conditions during Wednesday’s press conference, which followed the Fed’s decision to hike interest rates by another 25 basis points. Some even took issue with Powell’s underlying claim, arguing that according to at least one popular measure, financial conditions are little-changed from a year ago. Among them was Allianz’s Mohamed El-Erian, who sounded off in a tweet, saying “Not sure which index he is using. The most widely cited ones show overall financial conditions as loose as they were a year ago.”
Instead, Powell repudiated this notion, and rightfully so, according to LeBas, since the impact that market swings have on inflation is rarely so direct. The S&P 500 SPX gained 42.61 points, or 1.1%, on Wednesday to finish at 4,119.21, its highest level since August. For the Nasdaq Composite COMP , it was the highest close since September. The yield on the 2-year Treasury note TMUBMUSD02Y fell by roughly 8 basis pints to 4.125%, while the yield on the 10-year note TMUBMUSD10Y fell by 10.4 basis points to 3.442%. U.S.