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U.S. and Canadian stocks closed higher after a choppy trading session on Tuesday, as investors digested comments from Federal Reserve Chair Jerome Powell about how long the central bank may need to tame inflation.

Bank of Canada Governor Tiff Macklem also spoke, saying that no further interest rate hikes will be needed in this country if, as expected, the economy stalls and inflation comes down.

But the focus for markets was on Powell, who said 2023 should be a year of “significant declines in inflation.”

His comments fed investor hopes for less aggressive monetary policy that were stymied after a strong U.S. jobs report last Friday. “We didn’t expect it to be this strong,” Powell said at the Economic Club of Washington, referring to the nonfarm payrolls report for January, but it “shows why we think this will be a process that takes quite a bit of time.”

Following Powell’s comments, Morgan Stanley said it added 25 basis point to its forecast for the May policy meeting, but continued to expect the first 25 basis point rate cut for December, 2023.

“Powell expects they’re not going to be cutting rates anytime soon, but that there is a good path, that they’re accomplishing what they need to accomplish,” said Shawn Cruz, head trading strategist at TD Ameritrade.

Wall Street’s main indexes fluctuated wildly during and after Powell’s remarks, and analysts said volatility is unlikely to dissipate soon.

“Until we see softening and inflation throughout the economy and throughout the globe, it’s going to be hard to push the markets up in a decisive fashion,” said Carol Schleif, chief investment officer at BMO Family Office.

The tech-heavy Nasdaq rallied on news form Microsoft Corp, and the S&P 500 also got a boost. The company’s shares rose 1.29% as it unveiled an integration of ChatGPT, a chatbot from OpenAI, into its products.

Last week, the Fed raised interest rates by 25 basis points, with markets now pricing in a peak rate above 5% after Friday’s strong jobs data.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 96.08 points, or 0.5%, at 20,725.00, moving back in reach of its highest closing level in nearly eight months which it notched last Tuesday at 20,767.38.

The energy sector, which accounts for about 19% of the TSX’s weighting, rose 2.8% as the price of oil settled 4.1% higher at $77.14 a barrel.

The materials group, which includes precious and base metals miners and fertilizer companies, added 0.8%. It was helped by a 9.9% jump in the shares of Lithium Americas Corp after a favourable U.S. court ruling on the Thacker Pass lithium mine project.

First Quantum Minerals Ltd shares clawed back most of the previous day’s decline, rising 7.3%, and financials advanced 0.9%.

On Wall Street, the Dow Jones Industrial Average rose 265.67 points, or 0.78%, to 34,156.69, the S&P 500 gained 52.92 points, or 1.29%, to 4,164 and the Nasdaq Composite added 226.34 points, or 1.9%, to 12,113.79.

On Monday, U.S. stock indexes were dragged by views that rates would stay higher for longer. Still, all three major averages are in the black for 2023, with the Nasdaq adding over 15%, led by a revival in battered mega-cap growth stocks.

U.S.-listed shares of Baidu Inc Tuesday soared 12.18% as the Chinese search engine said it would conclude testing of its ChatGPT-style project “Ernie Bot” in March.

Most sectors on the S&P 500 ended higher. The energy sector the top gainer. The technology and communication services sectors were also among top gainers.

Among top advancing stocks on the Dow Jones Industrial Average, Boeing Inc rose 3.84% after the U.S. planemaker confirmed it expects to cut about 2,000 white-collar jobs.

DuPont De Nemours Inc jumped 7.50% on a higher-than-expected quarterly profit supported by higher pricing for its products.

Bed Bath & Beyond plunged almost 50% as the home-goods retailer sought to raise $1 billion in a last-ditch effort to avoid bankruptcy. The company completed the equity offering after the close of trading.

So far, more than half of the companies on the S&P 500 have reported quarterly earnings, with 69.1% of them beating expectations, according to Refinitiv. Still, analysts expect fourth-quarter earnings to decline 3.1%.

Reuters, Globe staff

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