Why are stocks up today?

The stock market can’t make up its mind today. After spending most of the morning in the red, stocks jumped about 1% on some remarks from Federal Reserve Chairman Jerome Powell. However, subsequent remarks caused stocks to fall sharply, losing those gains and then some, with most indexes down around 0.5%. Then the market rebounded once again, with stocks up more than 0.5% again for the S&P500 and the Nasdaqat the time of writing.

Okay, the market is clearly having a hard time evaluating the communication taking place today. Indeed, Powell’s high-profile speech at the Economic Club of Washington spurred some intriguing price action in markets today. Much of this volatility appears to be related to the inability to fully understand to what extent and for how long the Fed will maintain its aggressive monetary policy.

Let’s dive into what Powell said and why the market is struggling to price in those comments today.

Why are stocks up today?

Let’s start with why stocks rallied in the first place today. Federal Reserve Chairman Jerome Powell seems ready to pop the champagne when it comes to lowering inflation. So far, he believes that a “disinflationary process” is underway. In his words, “the process of reducing inflation has begun and it has begun in the goods sector”, although there is still “a long way to go.” These are the very early stages of disinflation.

Still, this is great news for investors pricing in a pause and pivot scenario.

That said, Powell acknowledged that strong jobs reports or higher-than-expected inflation figures could change the minds of central bankers. So Powell’s comment that “we may well have to do more and raise rates more than expected” seems to have spooked the market.

On the whole, it seems that these remarks are digested favorably by the markets. We will see in what color the markets will decide to end the day. That said, one thing is certain – more volatility is likely to occur this week as more Fed speakers take to the podium.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.