Stocks have best day in months after Fed chairman hints at fewer interest hikes

Stocks surged on Wall Street on Wednesday, powering a 600-point gain in the Dow Jones industrial average, after the head of the Federal Reserve hinted at slower interest rate increases.

The market snapped higher shortly after noon after Federal Reserve Chairman Jerome Powell suggested the central bank might consider a pause in its interest rate hikes next year.

The Fed needs to raise interest rates to stave off inflation but investors fear they may also slow down economic growth.

Technology stocks posted some of the biggest gains. Salesforce.com surged 10.3 percent.

The Dow climbed 617 points, or 2.5 percent, to 25,366, its biggest gain in eight months.

The Standard & Poor's 500 index rose 61 points, or 2.3 percent, to 2,743.

The NASDAQ composite climbed 208 points, or 2.9 percent, to 7,291.

The Fed chairman said the economic outlook remains “solid,” bolstering expectations for a rate hike when the central bank meets next month, but he noted that the effects of higher rates take time to show up in data. All told, investors surmised the Fed is likely to reduce the number of hikes or outright stop them next year.

“Stocks are rallying dramatically because Chair Powell took a far more dovish tone than he did just a month ago when he said rates were a long way from neutral,” Kristina Hooper, chief global market strategist at Invesco Ltd, said in an email interview. “This is in line with the more dovish tone Vice Chair Richard Clarida has taken in recent weeks, but which the market didn’t believe because it didn’t come from Powell. Now investors are true believers – and are reacting accordingly.”