NEW YORK — Wall Street closed higher, breaking a 3-week losing streak, after the head of the Federal Reserve said it will “proceed carefully” as it decides what to do with interest rates. The S&P 500 rose 0.7% Friday after flipping between small gains and losses a few times. The Dow added 247 points, and the Nasdaq composite rose 0.9%.
Wall Street had the speech circled on calendars because it was hoping Powell would say the Fed was done with its hikes to interest rates, which grind down inflation at the cost of slowing the economy and hurting prices for investments. But one word of Powell's stood out in particular to Brian Jacobsen, chief economist at Annex Wealth Management, particularly as it relates to Powell's speech last year at the same Fed event. That 2022 speech caused stocks to fall sharply.
The much higher rates have already sent the manufacturing industry into contraction and helped cause three high-profile U.S. bank failures during the spring. They've also helped to slow inflation, but a string of stronger-than-expected reports on the economy has raised worries that upward pressure remains. That could push the Fed to keep rates higher for longer.
The two-year Treasury, which more closely tracks expectations for the Fed, rose to 5.06% from 5.02% late Thursday. Traders see better than 50% chance the Fed will hike its main interest rate again this year. That's up sharply from just a week ago, according to data from CME Group.