Wall Street rushes to close higher after Fed statement

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 13, 2022. REUTERS/Brendan McDermid/File Photo

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  • The Federal Reserve announces the largest interest rate increase since 1994
  • Powell: I don’t expect 75 basis points to be the norm
  • Standard & Poor’s 500 settles series of consecutive losses over five sessions

NEW YORK (Reuters) – The Standard & Poor’s 500 Index rose on Wednesday to snap five losing sessions, after the Federal Reserve’s policy announcement raised interest rates to market expectations as the central bank sought to combat rising inflation without sparking a spark. recession.

The Federal Reserve raised its target interest rate by three-quarters of a percentage point, its largest rise since 1994, and predicted a slowing economy and an increase in unemployment in the coming months. Read more

Stocks were volatile after the announcement, before turning higher after Chairman Jerome Powell said at his press conference that 50 basis points or 75 basis points was likely at the next meeting in July, but he did not expect rises of 75 basis points to be common.

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“Once the Fed chair said there could be a similar 75 basis point increase at the next meeting, that’s when the market rallied,” said Sam Stovall, senior investment analyst at CFRA Research in New York.

“It’s kind of a vote of confidence that the Fed is finally alert to the inflation problem and ready to take a more aggressive stance.”

According to preliminary data, the Standard & Poor’s 500 Index rose 52.77 points, or 1.41%, to close at 3788.25 points, while the Nasdaq Composite Index rose 269.40 points, or 2.49%, to 11097.74 points. The Dow Jones Industrial Average rose 289.39 points, or 0.95%, to 30,654.22 points.

Investors quickly raised their expectations that the central bank will raise interest rates by 75 basis points over the past several days after a stronger-than-expected consumer price reading on Friday. The Fed was previously widely expected to announce a 50 basis point increase, a rapid swing in expectations that led to a violent sell-off in global markets. Read more

It was the expected changes by analysts at major banks, including JP Morgan and Goldman Sachs, which both expected a 75 basis point rate hike by the Federal Reserve, raising expectations. Investors have since scrambled to re-price their payout. Read more

Rising concerns about rising inflation, higher borrowing costs, slowing economic growth and corporate profits kept stocks under pressure for most of the year.

On Monday, the S&P 500 (.SPX) index fell more than 20% from its record closing high, confirming that the bear market started on January 1st. 3, according to a commonly used definition.

Earlier economic data on Wednesday showed that US retail sales unexpectedly fell 0.3% in May as car purchases fell amid shortages and record high gasoline prices drove away other commodities, much less than expectations for a 0.2% rise. Read more

“Most of the additional data points were negative, as of this morning the retail sales numbers were weak, so just in the last four business days you’ve had a number of negative economic numbers,” said Eileen Hazen, senior market analyst at FLPutnam Investment. Management in Wellesley, Massachusetts.

Among individual stocks, Citigroup (CN) rose as one of the top performers on the S&P 500 Bank Index (.SPXBK), while Nucor Corp. (NUE.N) advanced after it forecast upbeat earnings for the current quarter on strong demand for steel.

Boeing (BA.N) stock rose after China Southern Airlines Ltd. (600029.SS) conducted test flights of its 737 Max for the first time since March, in a sign that the plane’s return in China may be approaching as demand picks up. Read more

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Additional reporting by Bansari Mayor Kamdar in Bengaluru. Edited by Aurora Ellis

Our Standards: Thomson Reuters Trust Principles.

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