Stocks hit record after Fed's Powell explains what it'd take to hike rates

Stocks rallied to a record high Wednesday after Federal Reserve Chairman Jerome Powell laid out what it would take for the central bank to hike rates again.

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The major averages were little changed after the Fed cut rates earlier Wednesday, but surged after Powell said inflation would have to be at a "persistently high rate" above its 2 percent target in order for the central bank to hike rates. Inflation is trending well below that level.

TickerSecurityLastChangeChange %
I:DJIDOW JONES AVERAGES28004.89+222.93+0.80%
SP500S&P 5003120.46+23.83+0.77%
I:COMPNASDAQ COMPOSITE INDEX8540.828717+61.81+0.73%

The Fed lowered its benchmark interest rate by 25 basis points, as expected, to a range of between 1.5 percent and 1.75 percent, but indicated it would "pause" on further easing. Officials did not explicitly say the easing cycle was over, the central bank just removed the language in its statement that said it would "act as appropriate" to sustain the economic expansion.

Wednesday's rate cut was the third by the Fed since it began its current easing cycle in July of this year. The July rate cut was the first by the central bank since 2008.

Earlier Wednesday, the Commerce Department announced third-quarter GDP rose 1.9 percent, topping the 1.6 percent growth that economists surveyed by Refinitiv were expecting. The reading was supported by strength in consumer and government spending, residential investment and exports.

Company earnings remain in focus with nearly half of the S&P 500 having reported results for the July-September quarter. The index is on pace to report a profit drop of 3.5 percent from the prior year, according to FactSet.

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That's not as bad as the roughly 4 percent decline that analysts were expecting on the eve of earnings season, but it would be the first time that profits dropped for three straight quarters since 2015.

After the bell Apple signaled solid demand for its latest line of iPhones during its crucial holiday season on Wednesday as strong fourth-quarter earnings results topped Wall Street’s expectations. Apple shares were up more than two percent in after-hours trading.

In other earnings news, General Electric shares rose after the conglomerate reported better-than-expected results and raised its industrial free cash flow outlook for the remainder of the year despite headwinds from the U.S. trade war with China and the grounding of Boeing's 737 MAX, an important customer for the jet-engine business.

TickerSecurityLastChangeChange %
GEGENERAL ELECTRIC COMPANY11.52+0.23+2.04%
AAPLAPPLE INC.265.76+3.12+1.19%

Elsewhere, Johnson & Johnson was higher after the healthcare products company said late Tuesday that a test of its baby powder found no evidence of asbestos. Some batches of the product were recalled last month after trace levels of chrysotile asbestos were found in a single container.

Pacific Gas and Electric shares jumped, while still at depressed levels, after the California utility said it restored power to 73 percent of the customers impacted by its Oct. 26 shutoff and that it doesn't expect strong enough winds to force a shutdown in the next week.

TickerSecurityLastChangeChange %
JNJJOHNSON & JOHNSON134.94+3.98+3.04%
PCGPG & E CORP.7.42+0.72+10.75%

U.S. Treasurys rallied following the Fed's decision, pushing the 10-year yield down 3.2 basis points at 1.803 percent.

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Ken Martin and the Associated Press contributed to this article.