Dow in bull market after Powell suggests rate hikes will ease

US stocks exploded higher Wednesday. The Dow is now more than 20% above its 52-week low, which puts it in a new bull market. Federal Reserve chair Jerome Powell strongly suggested that the central bank is ready to slow its pace of interest rate hikes. Powell noted that the Fed is still concerned about inflation but that it also does not want to jeopardize the health of the labor market and broader economy either.

Wednesday's rally helped push the markets to their second straight month of solid returns. The three major indexes wrapped up November with gains between 4% and 6%.

The Dow soared more than 735 points, or 2.2%

The S&P 500 rose 3.1%.

The Nasdaq Composite shot up 4.4%.

As stocks settle after the trading day, levels might still change slightly.

Federal Reserve chair Jerome Powell was flapping his inflation dove wings Wednesday. And Wall Street loved it.

Powell made it painstakingly clear that the Fed understands that it needs to be careful with future rate hikes to make sure it doesn't send the economy spiraling into a recession.

The Dow popped more than 350 points, or 1.1%.

The S&P 500 rose 1.9%.

The Nasdaq Composite surged 3.2%. 

The Federal Reserve's Beige Book, which sums up economic anecdotes from the central bank's dozen regional banks across the country, showed that there is growing evidence of moderating inflation.

"The pace of price increases slowed on balance, reflecting a combination of improvements in supply chains and weakening demand," the Fed said in the Beige Book.

The Fed added that the job market still remains strong, as "employment grew modestly in most districts." The continued tightness of the labor market may also help support the economy as well.

"Firms from many sectors reported preparations for a potential recession but also remain hesitant to lay off employees, given recent hiring difficulties," the Fed said.

Close watchers of the Federal Reserve had a lot to take in Wednesday, between Jerome Powell's speech, Q&A and the Beige Book.

Wall Street continued to cheer the more dovish comments from Federal Reserve chair Jerome Powell Wednesday. Stocks extended their gains after Powell wrapped up his prepared remarks at the Brookings Institution and answered questions about interest rates.

Powell said he still thinks there is a "path to a soft or softish" landing for the economy, a hope that the Fed will be able to choke off inflation without leading to a recession.

The Dow was up more than 250 points, or 0.8%.

The S&P 500 gained 1.4%.

The Nasdaq Composite rose 2.4%. 

The Federal Reserve could pull back on the pace of its aggressive rate hikes as soon as December, Fed Chairman Jerome Powell said Wednesday at an economic forum.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” he said in remarks at the Hutchins Center on Fiscal and Monetary Policy, his last public appearance before the central bank enters a blackout period ahead of its December 13-14 policymaking meeting.

“Despite some promising developments, we have a long way to go,” Powell said, noting that the Fed has “not seen clear progress” on decades-high inflation plaguing the economy.

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There was a lot of pressure on Federal Reserve Chair Jerome Powell to show that he and the rest of the Fed are still concerned about inflation but also ready to finally pull back on its historically aggressive pace of rate hikes. It looks like he just might have stuck the landing.

Stocks reversed course and turned higher in midday trading Wednesday after Powell said in a speech that "it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down."

The Dow rose about 75 points, or 0.2%.

The S&P 500 gained 0.6%.

The Nasdaq Composite rallied 01.3%. 

Treasury Secretary Janet Yellen called for greater oversight of crypto markets, citing the collapse of FTX as a wake-up call for regulators. 

“This is an industry that really needs to have adequate regulation, and it doesn’t,” Yellen told New York Times journalist Andrew Ross Sorkin at the DealBook Summit in New York.

The FTX fallout over the past few weeks “couldn’t provide a better illustration” of why regulatory gaps need to be closed. One upside of the implosion, Yellen said, is that it hasn’t spilled over to the banking sector.

The fall of FTX, the bankrupt crypto exchange founded by Sam Bankman-Fried, has put a harsh spotlight on the relatively lax oversight of the crypto industry, spurring calls for Congress and US financial regulators to do more to set rules in the often wildly speculative and volatile market for digital assets. 

Earlier Wednesday, Senator Sherrod Brown of Ohio, a longtime advocate of greater oversight of the industry, wrote a letter to Yellen urging her to work with lawmakers and regulators to crack down on crypto companies to prevent harm to investors and avoid contagion into traditional financial markets.  

“The failure of this crypto exchange brings to mind the litany of financial firm failures due to the combination of reckless risk taking and misconduct,” Brown wrote. 

"FTX’s business model combined three of the most common hazards in financial markets—leverage, illiquid holdings, and extreme concentration," he added.

Brown pointed to recommendations in an October report from the Financial Stability Oversight Council, or FSOC, laying out proposed regulatory approaches for the industry.

"Single regulatory agencies currently generally do not have a comprehensive view of crypto asset entities’ activities," Brown wrote. "I look forward to working on such legislation with you and the FSOC agencies." 

Investors were anxiously waiting for Jerome Powell to give a speech about the economy, inflation and interest rates Wednesday afternoon. Stocks were mostly in the red ahead of the remarks.

Wall Street is looking for more clarity about future rate hikes. The market enjoyed a massive rally in October on hopes that the Fed would soon reduce the size of its interest rate increases. But stocks have been more volatile lately as investors fear that the Fed may still be nervous about inflation.

The Dow fell about 225 points, or 0.7%, in midday trading.

The S&P 500 dipped 0.3%.

The Nasdaq Composite was flat. 

Kraken, the third-largest crypto exchange in the world, will lay off about 30% of its staff, or 1,100 people, the company announced Wednesday.

Kraken CEO Jesse Powell said in a blog post that the company was adapting to "current market conditions." The layoffs, he said, were necessary steps in the company's attempt to "weather crypto winter."

The crypto expansion over the past few years meant Kraken "had to grow fast, more than tripling our workforce," Powell wrote. This year "macroeconomic and geopolitical factors have weighed on financial markets," and severely limited that demand.

“I remain extremely bullish on crypto and Kraken,” Powell added.

Crypto exchanges have been experiencing more regulatory scrutiny and withdrawals since Sam Bankman-Fried’s FTX fell apart and filed for bankruptcy earlier this month.

The lending arm of crypto brokerage Genesis suspended redemptions and new loan originations earlier this month after an “abnormal” number of withdrawal requests that exceeded its current liquidity, citing market turmoil from the failure of FTX.

Bitfront, a crypto exchange backed by Japanese social media app Line, announced it would shut Tuesday down after failing to overcome turmoil in the industry.

The company said it had been unable "to overcome the challenges in this rapidly-evolving industry," but distanced its decision from the implosion of FTX.

"Please note that this decision... is unrelated to recent issues related to certain exchanges that have been accused of misconduct," it added.

Prices of digital currencies have plummeted. Bitcoin, the world's biggest cryptocurrency, has fallen about 65% so far this year. It was trading at about $16,828 on Wednesday afternoon, according to CoinDesk.