The S&P 500 and the tech-heavy Nasdaq pared losses on Monday as comments from U.S. Federal Reserve Vice Chair Lael Brainard lifted hopes that the Federal Reserve could ease its aggressive stance on interest rate hikes.
Brainard, a voting member of the rate-setting committee this year said that it would be “appropriate soon” for the U.S. central bank to reduce the pace of its aggressive monetary policy tightening.
“That is consistent with what the market’s already been telling us,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab in Texas, referring to traders pricing in a 50-basis-point rate hike by the Fed in December. .
“When someone who is a part of the committee who makes that decision reiterates what the market is telling us, that gives people some confidence to potentially go in and buy (stocks).”
The S&P 500 and the Nasdaq had fallen as much as 0.7% and 1.4%, respectively, earlier in the session as hawkish comments from Fed Governor Christopher Waller over the weekend dented sentiment. Waller said on Sunday that smaller hikes should not be seen as Fed “softening” in its commitment to lower inflation.
Comments from both the Fed officials come against the backdrop of a softer-than-expected inflation report last week, which had raised hopes that the Fed could scale back its hefty interest rate hikes and helped drive a euphoric market rally.
The S&P 500 on Friday logged its biggest weekly percentage gain in about five months, while the tech-heavy Nasdaq (.IXIC) notched its best week since March.
In the week ahead, several other Fed officials are also due to speak while market focus will also be on a slew of economic data for further clues on the outlook for interest rates.
Chinese leader Xi Jinping and U.S. President Joe Biden met on Monday for long-awaited talks that come as relations between their countries are at the lowest in decades, marred by disagreements over a host of issues from Taiwan to trade.
Declining issues outnumbered advancers for a 1.54-to-1 ratio on the NYSE and a 1.25-to-1 ratio on the Nasdaq.
The S&P index recorded 13 new 52-week highs and one new low, while the Nasdaq recorded 43 new highs and 47 new lows.