Warsh Says Fed Believes the 'Medicine' Is Working

The bond market swung on Wednesday, while US stocks held relatively steady after the Federal Reserve decided not to raise its main interest rate to bring down high inflation.

• The S&P 500 rose 21.38 points, or 0.3%, to 7,743.98.
• The Dow Jones Industrial Average rose 97.53 points, or 0.2%, to 52,475.10.
• The Nasdaq composite rose 72.04 points, or 0.3%, to 26,549.85.

In the bond market, the two-year Treasury yield initially jumped after the Fed held its main interest rate steady. It then reversed course after traders pared expectations for coming hikes to rates, the AP reports. The central bank last month raised its main interest rate for the first time in three years in hopes of bringing down inflation, which has remained above the Fed's 2% target for years

The yield on the two-year Treasury dropped after Fed Chairman Kevin Warsh said the central bank wants to see how conditions play out before making its next move on rates. He pointed to how rates for loans going to businesses and others across the economy have already climbed recently and how lenders and investors have become "more discerning." He said the overwhelming judgment among Fed officials at their meeting was that "monetary medicine" is "starting to work some."

• Along with signals that the US economy continues to grow, Warsh said that "broadly, these developments go in the direction" of helping the Fed achieve its two goals of a healthy economy and relatively low inflation. Traders on Wall Street still see further increases to rates by the Fed as likely, but they pared back bets for how many may come by next summer, according to data from CME Group.

On Wall Street, GE HealthCare Technologies jumped 6.6% after delivering both profit and revenue for the summer that surpassed analysts' expectations. It also raised its forecasts for revenue growth and other financial measures for the full year. Etsy climbed 5.4% after its profit for the latest quarter blew past analysts' forecasts. CEO Kruti Patel Goyal said the online marketplace saw growth in active buyers from prior-year levels for the first time in two years, while its active seller base grew at its fastest rate in two years. Stocks in the artificial-intelligence industry were also relatively solid. Micron Technology rose 5.9% and was the strongest force lifting the S&P 500.

Wendy's jumped 15.1% to $7.04 after Trian Fund Management, run by investor Nelson Peltz, offered to buy the chain for $7.35 per share in cash. That helped offset a drop for Boston Scientific, which fell 5.8% even though the seller of medical devices reported a milder drop in profit for the latest quarter than analysts expected. It gave a forecast for profit in the current quarter that fell short of analysts' expectations. Robinhood Markets sank 3.3% after reporting weaker profit and revenue for the latest quarter than analysts expected.