news/AMZN/2023.02.01/Stocks rally, dollar slumps after Fed statement, Powell remarks.txt

*ADP employment softer than expected*Fed hikes by 25 basis points*Powell acknowledges disinflation process has startedNEW YORK, Feb 1 (Reuters) - A gauge of global stocks
rallied and the U.S. dollar slumped on Wednesday after the
Federal Reserve raised its target interest rate by the expected
25 basis points but comments from Chair Jerome Powell were
interpreted as dovish by the market.The Fed said the U.S. economy was enjoying "modest growth"
and "robust" job gains, with policymakers still "highly
attentive to inflation risks" as it seeks to tighten financial
conditions and reign in high prices. Markets have been pricing
in the possibility of a rate cut by the Fed in the back half of
the year.On Wall Street, U.S. stocks were choppy after the Fed
announcement but began to rally after Chair Jerome Powell
acknowledged inflation was starting to ease and the
disinflationary process was at an early stage."The market’s reaction implies investors feel we are much
closer to the end than we are, let’s say, to the middle of the
rate tightening cycle," said Sam Stovall chief investment
strategist at CFRA in New York."You certainly need disinflation in order to get down to
your inflationary target and even though he did say multiple
times that we are not yet at a sufficiently restrictive policy
stance to bring inflation back down to 2%, the other statements
implied that we are getting pretty close."The Dow Jones Industrial Average rose 6.92 points, or
0.02%, to 34,092.96, the S&P 500 gained 42.61 points, or
1.05%, to 4,119.21 and the Nasdaq Composite added 231.77
points, or 2%, to 11,816.32.The gains sent the S&P 500 to its highest close since August
25.Before the policy announcement, economic data painted a
mixed picture, with a labor market that remains strong while
manufacturing activity continues to weaken, showing contraction
for a third straight month.Investors have viewed a weaker labor market as a key
component to bring down stubbornly high inflation.Earnings season with earnings from names such as Apple
and Amazon are due on Thursday.Early gains for European shares faded to close virtually
unchanged ahead of the Fed statement, although industrial stocks
, up 0.85%, were a bright spot. On the heels of the Fed,
the European Central Bank (ECB) and Bank of England will make
their policy statements on Thursday, in which each is largely
expected to hike by 50 basis points.The pan-European STOXX 600 index closed down 0.03%
and MSCI's gauge of stocks across the globe
gained 1.08%. MSCI's index hit its highest intraday level since
August 17 and was poised for its biggest one-day percentage gain
since Jan 20.Data on Wednesday showed headline inflation in the euro zone
moderated to 8.5% in January, from 9% in December, while core
prices picked up to 7% from 6.9%, likely keeping pressure on the
ECB to raise interest rates aggressively.The dollar started February on a lower note, continuing its
weakening trajectory of the previous four months, losing further
ground after Powell's comments, hitting its lowest level since
late April. The dollar index fell 0.901%, with the euro
up 1.11% to $1.0983.The Japanese yen strengthened 0.83% versus the greenback at
129.02 per dollar, while Sterling was last trading at
$1.2371, up 0.41% on the day.U.S. Treasury yields initially moved up after the statement
but reversed course and mostly fell after Powell's comments were
still lower on the day, as benchmark 10-year notes
were down 10.5 basis points to 3.424%, from 3.529% late on
Tuesday, although the two-year yield briefly turned higher after
the most recent batch of economic data.Despite the drop in the dollar, U.S. crude settled
down 3.12% to $$76.41 per barrel and Brent settled at
$82.84, 3.07% lower on the day after U.S. government data showed
big builds in inventories while OPEC and its allies kept to
their output policy.(Reporting by Chuck Mikolajczak; editing by Jonathan Oatis and
Diane Craft)