Day Traders Diary

11/30/22

The major averages surged on Wednesday after Federal Reserve Chair Jerome Powell confirmed that the central bank will slow the pace of its aggressive rate-hiking campaign that has weighed on markets. The Dow Jones Industrial Average closed up 737 points, or 2.18%, to 34,589. Meanwhile, the tech-heavy Nasdaq Composite jumped 4.41% or 484 points to 11,468. The S&P 500 added 122 points or 3.09% to 4,080.

Powell cautioned the Fed may stay with restrictive policy for a long time before it ends its inflation fight.

"Despite some promising developments, we have a long way to go in restoring price stability," Powell said.

Powell's comments bolstered growing optimism among some investors that the Fed will deliver a smaller, half percentage point rate hike at its next meeting on Dec. 14 after four straight increases of three quarters of a point to tame high inflation.

"Investors are looking for that rock of certainty – something to hang your hat on for greater predictability of where the Fed's going with interest rates," said Greg Bassuk, CEO of AXS Investments. "The messaging that the pace of rate increases can begin slowing as early as December was that rock."

The 10-year Treasury yield eased a bit on the news.

Wednesday's rally provided an 11th-hour boost to a winning November. The Dow and S&P 500 ended the month up roughly 5.7% and about 5.4%, respectively, while the Nasdaq Composite gained nearly 4.4%.

Ed Yardeni of Yardeni Research thinks that the economy will likely hold up amid the Federal Reserve's rate hikes to tame high inflation, leading to a soft landing next year.

Still, that won't lead the S&P 500 to a new high for the next two years.

"I don't think we're looking at any tremendous bull market coming up here given that valuation multiples are still quite high," he said, during CNBC's "Halftime Report" on Wednesday, adding that he sees earnings going sideways for the next few years.

He thinks that the S&P 500 may get to about 4,800 in 2023, which would mark a new all time high and is more than 21% higher than where the index is currently trading. Still, he said he doesn't see stocks going much higher than that next year.