US stocks surge on hopes of dovish Fed

Markets mostly rose on Wednesday.

The S&P 500 surged 2.3 percent and the Nikkei 225 rose 1.0 percent but the STOXX Europe 600 was flat.

US investors were encouraged by Federal Reserve Chairman Jerome Powell’s comment during a speech at the Economic Club of New York that interest rates are “just below the broad range of estimates of the level that would be neutral for the economy”.

Investors have been concerned that rising interest rates will put pressure on stock valuations. A MarketWatch report suggested that even after the recent declines, stocks are not cheap.

“The best we would say is that it’s less expensive than it used to be,” said Willie Delwiche, investment strategist with RW Baird. “But we still consider valuations to be a headwind for stocks.”

“In the long run, changes to multiples are almost always related to interest rates,” said Keith Wibel, president of Foothills Asset Management.

Still, Wells Fargo Securities' Christopher Harvey believes stocks are on the cusp of a sharp turnaround.

“A fair amount of value has been uncovered in the sell-off,” he said. “We think we can work higher from these levels.”