Wall Street Has Biggest Week Since June on New Speculation of US Rates Slowing by Year-End

NEW YORK (Sputnik) - Wall Street had its biggest week since June as airline to technology stocks surged Friday on renewed speculation that the Federal Reserve would slow or stop rate hikes altogether by next year, despite the central bank not giving any indication it will not back off till it had the runaway US inflation under control.

The Dow Jones Industrial Average, Wall Street’s broadest equities indicator comprising stocks of 30 large US corporations, closed up 740 points, or 2.4% at 31,074 points. The Dow has risen for three straight weeks now, racking up 8%. The current week’s gain of 5% was its largest since the week ended June 17.

The S&P 500 Index, which represents the top 500 US stocks, finished the day up 87 points, or 2.4%, at 3,753. The S&P rose 5% on the week, its most since the week to June 17.

The Nasdaq Composite Index, which comprises marquee names in technology such as Amazon, Apple, Facebook, Netflix and Google, settled Friday’s trade up 246 points, or 2.3%, at 10,860. For the week, it jumped 5%, also its most since the week to June 17.

Stocks rallied after a Wall Street Journal report cited officials with apparent knowledge of the Federal Reserve’s thinking as saying that the Fed bankers “have begun signaling their desire both to slow down the pace of [rate] increases soon and to stop raising rates early next year.”

The report added that the Fed bankers “want to reduce the risk of causing an unnecessarily sharp slowdown”.

Economist Adam Button said investors probably took the Journal report more seriously than necessary to bump up a stock market that had spent a nerve-racking September.

“Either we reach a super restrictive level [on rates] to quell inflation, which would likely lead to a recession, or there is an expected pause in rates near the Fed's current target range,” said Button.

Inflation, as measured by the Consumer Price Index, stood at 8.2% for the year to September, not too far from the 40-year peak of 9.1% during the 12 months to June.

The Fed’s target for inflation is 2% per year and it has said it will not back off on interest rate hikes until it achieves its aim.  Since March, the central bank has raised rates by 300 basis points from an  original base of just 25. The Fed intends to add another 125 basis points to rates before the year-end.

Economists have accused the Fed of being slow to the inflation-fight and say its move to overcompensate for its earlier inaction with aggressive rate hikes will trigger a recession. Most of the US central bank’s senior officials refute that assertion.

The US economy could land in 1990-style of a mild recession by spring next year as unyielding inflation and the Fed’s interest rate hikes come to a head, Fitch Ratings said in a report on Tuesday.