Wall Street rallies back to records following Fed speech

NEW YORK (AP) — Wall Street is rallying Friday after the head of the Federal Reserve said it's still far from pulling interest rates off the record low that's helped the market soar, even if it does begin dialing back its support for the economy later this year.

The S&P 500 was 0.9% higher at 4,509 in afternoon trading and back above its all-time high of 4,496.19 set on Wednesday. The Dow Jones Industrial Average was up 230 points, or 0.7%, at 35,443, as of 3 p.m. Eastern time, while the Nasdaq composite was 1.3% higher.

Stocks have set record after record this year thanks in large part to the Federal Reserve’s massive efforts to prop up the economy and financial markets. But the gains had grown more tentative as the beginning of the end of the Fed’s assistance came into sight, now that the unemployment rate has dropped and inflation has picked up.

In a speech that investors have had circled for weeks, Fed Chair Jerome Powell said that the economy has met one big milestone the central bank had set to slow the $120 billion in bond purchases it's making each month. That could mean a paring back by the end of the year of the purchases, which are meant to keep longer-term interest rates low and juice the economy.

But Powell also cited past mistakes where policy makers made premature moves in the face of seemingly high inflation, stressing again that today's high inflation looks to be only temporary. He also made clear that a slowing of the Fed's bond purchases doesn't mean a rise in short-term rates is imminent. That would require the job market and inflation to hurdle “substantially more stringent” tests.

“We have much ground to cover to reach maximum employment," Powell said.

At the end of Powell's speech, many investors took it as a sign the Fed will keep...