US stocks were volatile amid the Federal Reserve’s interest rate decision, swinging from losses to slight gains around midday.
The S&P 500 recently gained 0.8%, while the Dow Jones Industrial Average rose 0.7%. The technology-focused Nasdaq Composite was up 0.6% after paring earlier losses.
Federal Reserve officials announced Wednesday afternoon that they are raising interest rates by half a percentage point and agreeing to plans to begin reducing the central bank’s $9 trillion asset portfolio next month.
These moves are part of a dual effort to slow the economy and ease inflation, which has reached its highest levels in four decades. With stocks and bonds volatile recently, many investors are wondering if the Fed will be able to continue on its planned course of increasing interest rates without further worries in the markets. They are also grappling with fears that the Federal Reserve may inadvertently push the economy into a recession.
Investors will get a chance to hear from Federal Reserve Chairman Jerome Powell Wednesday afternoon when he addresses reporters after the conclusion of the central bank’s policy meeting.
This is the question markets are dealing with: Where is the Fed headed? Is this series of price increases of 5% or 6% really going to end in cooling the economy? said Carsten Brzeski, ING Groep‘s
Global Head of Macro Research.
The US economy remains strong despite the fact that it contracted in the first quarter of this year, Treasury Secretary Janet Yellen said on Wednesday at the Wall Street Journal’s CEO Board summit in London.
Technology shares led earlier declines in the broader market on Wednesday. The group took a hit this year as investors facing higher interest rates turned away from companies with higher valuations. Amazon.com and Netflix each lost more than 1%.
Corporate earnings also spurred volatility in the market on Wednesday. Airbnb shares rose 3.1% after the company said it expects to post its first full-year net profit this year. Starbucks added 8.2% after the coffee chain said profits and sales grew in the most recent quarter.
Lyft shares fell 33% after the passenger services company said it will invest in the current quarter to ensure adequate supplies for drivers and grow its delivery platform, raising investor concerns as spending affects operating profit.
Meanwhile, government bond prices slipped, with the yield on 10-year Treasuries coming in at 2.97%, compared to 2.957% on Tuesday. Bond yields and prices move in opposite directions.
The bond market was hit by its worst trajectory in decades as investors struggled to cope with accelerating inflation and the prospect of a rapid rate hike by the Federal Reserve. This has added to the turmoil in the stock market this year.
Oil prices rose after the European Union proposed banning imports of Russian crude within six months and banning imports of refined oil products from Russia by the end of the year. And US crude oil rose in the latest trading 5.3 percent to 107.80 dollars a barrel.
Abroad, stocks were mostly low. The Stoxx Europe 600 Continental Index lost 1.1%. Hong Kong’s Hang Seng fell 1.1%, and South Korea’s Kospi fell 0.1%. Markets in mainland China and Japan are closed for a holiday.
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