The Dow Jones Industrial Average gained altitude late Thursday morning as Federal Reserve Chairman Jerome Powell said there’s no evidence the economy is overheating, and emphasized that a “gradual path” to raising rates was appropriate. The comments came in the Fed boss’s second day of congressional testimony, this time in front of the Senate Banking Committee. Powell said “nothing suggests wage inflation is at the point of acceleration. Fears of out-of-control inflation has been the biggest bugaboo for the market in recent weeks, helping drive stocks into correction territory early last month. A correction is defined as a drop from a recent peak of at least 10%. On Tuesday, Powell’s testimony in front of a House committee, his first as a Fed chief, resulted in a selloff for stocks and pushed yields higher because they were interpreted as the Fed adopting a more aggressive monetary-policy path. As a part of his House testimony Powell said his personal view was that rate hikes were warranted given the strength of the U.S. economy, leading investors to price in a higher probability for four rate increases rather than three for 2018. Signs of rising inflation can prompt selling in bonds, driving yields higher and prices lower. Higher bond yields and the prospect of rate increases also can serve as a dampener for equity appetite, compared against the perceived safety of government bonds. The S&P 500 index was up 0.3% at 2,721, while the Nasdaq Composite Index rose 0.2%, in recent action.
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