By Caroline Valetkevitch
NEW YORK (Reuters) - U.S. stocks ended solidly higher on Tuesday, led by a 1% gain in the Nasdaq, on relief that Federal Reserve Chair Jerome Powell refrained in a speech from commenting on rate policy.
In his first public appearance of the year, Powell said at a forum sponsored by the Swedish central bank that the Fed's independence is essential for it to battle inflation.
Recent comments by other Fed officials have supported the view that the central bank needs to remain aggressive in raising interest rates to control inflation. Fed Governor Michelle Bowman said on Tuesday the bank will have to raise interest rates further to combat high inflation.
"Everybody hangs on every word from the Fed," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. Powell "didn't really say anything" about policy, he added.
Investors anxiously awaited the U.S. consumer prices index report Thursday, which is expected to show some moderation in year-on-year prices in December.
Traders are betting on a 25-basis point rate hike at the Fed's upcoming policy meeting in February.
"There are some indications that inflation is slowing significantly. What investors are really looking for is a gap down in major inflation data that could probably get the Fed's attention," Ghriskey said.
Amazon.com Inc. shares rose 2.9% and gave the Nasdaq and S&P 500 their biggest boosts.
The Dow Jones Industrial Average rose 186.45 points, or 0.56%, to 33,704.1; the S&P 500 gained 27.16 points, or 0.70%, at 3,919.25; and the Nasdaq Composite added 106.98 points, or 1.01%, at 10,742.63.
Shares of Microsoft Corp rose 0.8%, a day after Semafor, citing people familiar with the matter, reported that the tech company was in talks to invest $10 billion in ChatGPT-owner OpenAI.
Communications services was the day's best-performing sector, while energy rose along with oil prices.
This week marks the start of the fourth-quarter earnings season for S&P 500 companies, with results from several of Wall Street's biggest banks due later this week.
Shares of investment bank Jefferies Financial Group rose 3.8% on Tuesday, a day after it posted its second-best year for investment banking revenue. It also reported a 52.5% slump in fourth-quarter profit.
Analysts expect overall S&P 500 earnings to have declined 2.2% in the fourth quarter from a year ago, according to IBES data from Refinitiv, as worries about rising rates and the economy mounted.
Some investors are hoping for signs that the Fed may soon take a break after raising the federal funds rate seven times in 2022.
The World Bank on Tuesday slashed its 2023 growth forecasts on Tuesday to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies.
Volume on U.S. exchanges was 10.02 billion shares, compared with the 10.91 billion average for the full session over the last 20 trading days.
Advancing issues outnumbered decliners on the NYSE by a 2.33-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored advancers.
The S&P 500 posted four new 52-week highs and no new lows; the Nasdaq Composite recorded 71 new highs and 30 new lows.
(Additional reporting by Ankika Biswas, Amruta Khandekar and Johann M Cherian in Bengaluru; Editing by Shinjini Ganguli, Shounak Dasgupta and Richard Chang)