Jan. 11, 2019
The Dow Jones Industrial Average posted a five-day winning streak—its longest such streak since September—after Federal Reserve Chairman Jerome Powell said he was taking a patient approach of “waiting and watching” on interest rates.
Powell’s comments underscored the more wait-and-see approach to interest-policy that Fed officials have been discussing in this month. In December, after the Fed raised a benchmark interest rate and indicated more rate hikes would follow in 2019, jittery investors sold off stocks to 14-month lows.
Since then, Powell and other Fed officials have walked back comments that investors saw as hawkish on inflation while also risking an economic slowdown.
“We’re in a place where we can be patient and flexible and wait and see what does evolve, and I think for the meantime we’re waiting and watching,” Powell said Thursday at the Economic Club in Washington, D.C. “You should anticipate that we’re going to be patient and watching, and waiting and seeing.”
Initially, U.S. stocks fell on Powell’s comments Thursday, including remarks that the Fed would continue to reduce its balance sheet to “be substantially smaller than it is now.” After reading the tea leaves of his overall comments, investors began bidding up stock prices again.
The Dow closed Thursday up 0.51% at 24,001.92. The S&P 500 Index rose 0.45% to 2596.64, while the Nasdaq Composite ended up 0.42% at 6986.07.
Powell’s speech also addressed his longer-term concern about rising U.S. debt. “I’m very worried about it,” he said. “It’s a long-run issue that we definitely need to face—and ultimately, will have no choice but to face.”
In a measure of how much the Fed’s more dovish approach has soothed investor concerns about rising interest rates, a survey by The Wall Street Journal Thursday said that about 60% of economists expect the Fed to hold rates steady until at least June. A few weeks ago, many were bracing for another rate increase as early as March.