Share

Dow closes more than 400 points higher, Nasdaq snaps 7-day slump as Wall Street shakes off rate hike concerns

Pro Picks: Watch all of Wednesday's big stock calls on CNBC
VIDEO6:5906:59
Pro Picks: Watch all of Wednesday's big stock calls on CNBC

Stocks rose Wednesday — trying to shake off a three-week slide — as rates and oil prices eased, cooling investor concerns about continued high inflation.

The Dow Jones Industrial Average gained 435.98 points, or 1.40%, to end the day at 31,581.28. The S&P 500 rose 1.83% to 3,979.87. The Nasdaq Composite ticked up 2.14% to 11,791.90, breaking a seven-day losing streak.

U.S. Treasury yields dipped following a jump on Tuesday. Oil prices slumped, with West Texas Intermediate crude settling at $81.94 a barrel — its lowest close since January. The British pound hit its lowest level against the U.S. dollar since 1985.

Stocks rallied as Fed Vice Chair Lael Brainard reaffirmed that the central bank would do what it takes to stifle inflation, while also noting the risks of going too far. Many traders decided to focus on this latter point from her speech.

"At some point in the tightening cycle, the risks will become more two-sided," Brainard said. "The rapidity of the tightening cycle and its global nature, as well as the uncertainty around the pace at which the effects of tighter financial conditions are working their way through aggregate demand, create risks associated with overtightening."

The moves higher reversed an earlier dip into negative territory in futures trading. Stock futures slumped after a Wall Street Journal article suggested that Federal Reserve Chairman Jerome Powell's commitment to reduce inflation could mean that the central bank hikes rates by 0.75 percentage point in September, which would be the third consecutive increase of that size.

Markets have been hoping that the Fed would start to hand out smaller increases starting in September, but at one point in the day, they were pricing in an 86% chance of a 0.75 percentage point hike.

On Wednesday, the Federal Reserve gave its summary on current economic conditions, known as the Beige Book. The report showed that economic activity was little changed in many regions across the U.S., and that growth outlooks remain weak.

Stocks have struggled recently as Treasury yields trade around their highest levels since June. On top of that, September has historically been the toughest month for the market. All eyes are on the 3,900 level on the S&P 500. Some see the index falling to even lower lows, while others are optimistic about a year-end rally.

"With equities back to June lows and the rates path reset higher, more inflation easing along with decisive EU government intervention to tackle the energy crisis could prompt another bear squeeze," Emmanuel Cau of Barclays wrote in a Wednesday note. "Big picture, we think stocks remain in a tough spot given a poor growth-policy trade-off."

Lea la cobertura del mercado de hoy en español aquí.

All major averages close higher, Nasdaq snaps 7-day losing streak

Stocks rallied Wednesday as Wall Street looked past concerns about aggressive rate hikes coming from the Federal Reserve.

The Dow Jones Industrial Average gained 435.98 points, or 1.40%, to end the day at 31,581.28. The S&P 500 rose 1.83% to 3,979.90 and the Nasdaq Composite ticked up 2.14% to 11,791.90, breaking a seven-day losing streak.

—Carmen Reinicke

Airline stocks climbing

Shares of many well-known airlines rose Wednesday after United Airlines raised its third-quarter sales forecast and reported strong demand, despite the end to the peak summer travel season, helping lift airline shares.

"We're seeing a really strong September," said Patrick Quayle, United's senior vice president of global network planning and alliances during a Cowen industry conference. "It does not appear that summer has come to an end. It's that strong."

United Airlines stock jumped 5% after the report. Here's how much other airline stocks jumped today:

American Airlines: +4.69%

Delta Air Lines: +3.32%

Southwest Airlines: +2.53%

—Carmen Reinicke, Leslie Josephs

Stocks at session highs heading into last hour of trading

All three major averages were near session highs heading into the last hour of trading Wednesday. The Dow Jones Industrial Average gained 470 points, or 1.51%. The S&P 500 jumped 1.87%. The Nasdaq Composite rose 2.14%, looking to break a seven-day loss streak, its longest since 2016.

Almost every sector in the S&P 500 was positive Wednesday except for energy, which slumped with oil prices.

- Carmen Reinicke

Wednesday's rally too defensive to trust, strategist says

The makeup of Wednesday's market rally doesn't look like a true reversal after three weeks of selling, said Andrew Smith, chief investment strategist at Delos Capital Advisors.

"If the path was all clear ... utilities [sector] should not be where it's at — and it's up today — from a performance standpoint. And on an equal weighted basis, it's up 10% for the year," Smith said. "There's still a defensive tilt to the market."

The Utilities Select Sector SPDR Fund was up 2.9% on Wednesday afternoon, easily outpacing the broader market.

Smith said he was using today's moves as an opportunity to sell some stock and raise additional cash.

— Jesse Pound

Stocks rally on comments from Fed Vice Chair Lael Brainard

Federal Reserve Vice Chair Lael Brainard said in a speech Wednesday that the central bank is ready to fight inflation for as long as it takes to bring consumer price increases in check.

That means the pace of rate hikes needs to continue and that the central bank's benchmark rate will need to stay high for longer, she noted.

Brainard said that having rates higher for longer is necessary to make sure that inflation is truly coming down.

"It may take some time for the full effect of these tighter financial conditions to work their way through the economy," she said, adding "The disinflationary process here at home should be reinforced by weaker demand and tightening in many other countries."

Still, Brainard also noted there is a risk of going too far and said the Fed should be careful to avoid overtightening. Markets rallied on the news.

"At some point in the tightening cycle, the risks will become more two-sided," she said. "The rapidity of the tightening cycle and its global nature, as well as the uncertainty around the pace at which the effects of tighter financial conditions are working their way through aggregate demand, create risks associated with overtightening."

- Carmen Reinicke

Fed's Beige Book shows economic activity unchanged in last six weeks

The Federal Reserve's Beige Book, a report of economic activity, showed that such activity was unchanged in the last six weeks.

Most districts noted slight to modest softening in their district. At the same time, consumer spending remained relatively stable with a small drop in spending on autos. Overall, the growth outlook remains generally weak for the U.S. economy going forward.

- Carmen Reinicke, Steve Liesman

Dow rallies more than 300 points

The Dow Jones Industrial average rallied to session highs of more than 330 points on Wednesday as Wall Street looks to shake off a three-week slump.

The S&P 500 and the Nasdaq Composite also jumped, with the latter on track to snap a seven-day loss streak. The moves higher came as oil prices slipped, easing fears that inflation will continue to be high and warrant more aggressive rate hikes from the Federal Reserve.

-Carmen Reinicke

H