Stocks surged and bonds sold off Wednesday afternoon in a powerful move, after market pros took Fed Chairman Jerome Powell's comment to mean the Fed is nearing an end of its rate-hiking cycle.
Powell said the Fed's key benchmark interest rate is near the neutral rate — the rate where the Fed could consider stopping rate hikes. That's an important change from a comment he made in early October about the neutral rate being a long way off.
The Dow surged by more than 500 points, and the 2-year Treasury yield, most reflective of the Fed rate policy, sold off hard. The 2-year yield fell to 2.79 percent after reaching a high earlier of 2.85 percent.
"It's a game of semantics because after a rate hike in two weeks, the fed funds range is going to be 2.25-2.50 percent, and if 3 percent is neutral, then 2.5 is just below 3," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "The market is taking this as maybe we've got two hikes left, and we're close. It's a word game, but I think that's what people are latching onto."