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U.S. and Canadian stocks rallied on Wednesday and the Nasdaq posted its biggest daily percentage gain since April 2020 as the Federal Reserve raised interest rates as expected and comments by Fed Chairman Jerome Powell reassured investors.

In addition, quarterly reports from Microsoft Corp and Alphabet Inc provided encouragement about the earnings season.

The S&P 500 closed at its highest level since June 8 and the Canadian benchmark index ended at a one-month high.

The Fed raised the benchmark overnight interest rate by three-quarters of a percentage point. The move came on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.

Powell said in a news conference following the rate announcement that he did not believe the U.S. economy is currently in a recession but that it is softening.

Powell also “didn’t automatically say we needed another rate hike,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“It was a calming statement coming on the heels of a day where you saw some earnings and revenues that were better than expectations, albeit expectations that were very tempered.”

Wednesday’s hike was also widely anticipated by investors.

“This was widely expected and encouraging that it was a unanimous decision,” said Jack Ablin, chief investment officer and founding partner at Cresset Capital. “It was well telegraphed and properly balanced against expectations.”

The S&P/TSX composite index ended up 281.88 points, or 1.5%, at 19,254.56, its highest closing level since June 27.

It was helped by gains for Canadian National Railway Co and Rogers Communications, up 4.2% and 0.6%, respectively, after reporting better-than-expected results.

The strength in the U.S. tech sector was also seen in Toronto, where technology stocks rose 4.3%. Shopify was 11% higher after taking a beating earlier this week when it announced job cuts.

The TSX energy group climbed nearly 3% as oil prices rose. U.S. crude oil futures settled 2.4% higher at US$97.26 a barrel after data showed U.S. crude oil stockpiles falling last week.

The materials group, which includes precious and base metals miners and fertilizer companies, added 1.4% as the price of gold rose.

The Dow Jones Industrial Average rose 436.05 points, or 1.37%, to 32,197.59, the S&P 500 gained 102.56 points, or 2.62%, to 4,023.61 and the Nasdaq Composite added 469.85 points, or 4.06%, to 12,032.42.

Microsoft rose 6.7% after it forecast double-digit growth in revenue this fiscal year on demand for cloud computing services. Alphabet jumped 7.7%, a day after it reported better-than-expected sales of Google search ads, easing worries about a slowing ad market.

Advancing issues outnumbered declining ones on the NYSE by a 5.27-to-1 ratio; on Nasdaq, a 3.15-to-1 ratio favored advancers. The S&P 500 posted one new 52-week high and 30 new lows; the Nasdaq Composite recorded 50 new highs and 107 new lows.

U.S. and Canadian bond yields held relatively steady on Wednesday.

The bond market has been pricing in an economic slowdown, if not a recession, as seen in the inversion of two- and 10-year Treasury note yields. The short end of the yield curve has been higher than the long end nearly all month - an unusual state that often signals a recession - but the gap narrowed after the Fed decision.

Reuters, Globe staff

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