Dow gets 617 point Powell pop, best three days since 2016

U.S. stocks surged after Federal Reserve Chair Jerome Powell indicated that interest rate increases may be more measured moving forward.

The Dow Jones Industrial Average jumped over 617 points, or 2.5 percent, registering the best three-day gain since 2016, with the addition of 111.22 points, or 4.22%, according to the Dow Jones Market Data Group. The S&P 500 and the Nasdaq Composite also jumped over 2 percent a piece.

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 33666.34 +116.07 +0.35%
SP500 S&P 500 4299.7 +25.19 +0.59%
I:COMP NASDAQ COMPOSITE INDEX 13201.276493 +108.43 +0.83%

“We know that moving too fast would risk shortening the expansion. We also know that moving too slowly – keeping interest rates too low for too long – could risk other distortions in the form of higher inflation or destabilizing financial imbalances. Our path of gradual increases has been designed to balance these two risks, both of which we must take seriously” said Powell in prepared remarks at the Economic Club of New York.

Powell also noted, “Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy -- that is, neither speeding up nor slowing down growth” he said.

The equity rally follows months of Fed trash talking by President Trump, most recently on Tuesday.

“I’m doing deals, and I’m not being accommodated by the Fed,” Trump said during an interview with the Washington Post. “So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing,” he added.

Did the Fed Chair blink after Trump’s attacks? Harvard Economist Martin Feldstein, who helped moderate Powell’s Wednesday speech, offered a sobering point of view, saying investors may be “over interpreting that phrase” when asked to define Powell's description of interest rates during an interview on FOX Business.

He also said the Fed should continue to raise interest rates. Investors are seeming to expect policy makers to make good on their planned fourth rate hike of the year in December, and another three that are expected in 2019.

The comments lit a fire under U.S. equities, which were little changed ahead of his speech. The rally pushed the Dow and the S&P 500 back into positive territory for the year with gains of around 2.6 percent each as the Nasdaq Composite built on its modest annual gains, now up 5.6 percent.

“Perhaps they [the Fed] see something we don’t see” said Teddy Weisberg, founder of Seaport Securities, speaking to FOX Business from the floor of The New York Stock Exchange where volume was above average with over 3.9 billion shares changing hands.

In economic news, the second revision to 3Q GDP came in as expected, unchanged at 3.5 percent and trailed second quarter growth of 4.2 percent.

As for commodities, global oil prices continued to suffer, with West Texas Intermediate closing around the $50 per barrel level. Nymex crude has lost 23 percent so far this month.