US equities extended their rally during Wednesday's afternoon session, with all three major indices heading toward record closes.
The S&P 500 rose 0.5%, the Nasdaq gained 1.2%, hitting fresh records and the Dow Jones surged 300 points, driven by a strong performance in the tech sector as traders closely followed comments from Fed Chair Powell.
Following rate reductions in September and November, market odds for a December quarter-point cut rose to 78% from 66.5%.
In corporate news, Salesforce surged 8.3% after exceeding revenue forecasts and raising its fiscal-year guidance, while Marvell Technology jumped 24.25% on strong earnings.
Key tech giants like Apple, Microsoft, Nvidia, Amazon, and Alphabet also were higher.
We heard from the Richmond Fed President in the morning and then the Fed Chair in the afternoon.
As we've discussed in recent days, the Fed has lined up speakers this week, with what appears to be an effort to lower the market confidence that a third consecutive rate cut will come when the Fed meets on December 18th.
It hasn't worked. The market is pricing in a 78% chance of a quarter point cut this month.
That said, we've talked about the hawkish response the Fed had to the 2016 election, based on assumptions that Trump policies would bolster the growth and inflation path.
It's not a stretch to assume the recent election has also influenced the Fed's outlook.
It was mentioned by Fed Governor Kluger, who said trade policy under the incoming administration may affect prices. At a conference in New York, the Richmond Fed President noted a survey of CFOs, where he said the confidence about growth and the economy were "significantly more optimistic" after the election.
We didn't get much out of the Fed Chair, other than to say "the economy is in very good shape" and they "could afford to be a little more cautious" in the easing cycle.
What is no longer clear?
With a "picture" Jerome Powell says is stronger now than it was when they made the 50 basis point rate cut back in September (more stable employment, stronger growth, and a little higher inflation). Will they still react, as they've promised in recent months, to any "cracks" in the labour market?
Is the "Fed put" still in play, given the outlook for Trumponomics?
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