Equity markets went on a wild ride Wednesday following comments from Fed chief Jerome Powell. Mr. Powell indicated that a deflationary period had begun, but it would be quite a while before it was fully tamed. He went on to say the committee wanted to be certain inflation was under control which should be taken to mean high-interest rates will last well into 2024 if not longer. The takeaway for the market is that high inflation is on the way out, but the downward pressure on economic activity and S&P 500 earnings will remain.

The S&P 500 gained more than 1.25% at the high of the day on Wednesday and closed above 4,150, but it is not out of danger yet. The 4,150 level marks the lower boundary of a zone of resistance that has yet to be broken. If the index can get above 4,300, a more sustained rally may form, if not the index is destined to remain rangebound in 2023.