US stocks skyrocket after Federal Reserve rate hikes

New York (AP) —Technologists slammed widespread stocks on Wall Street Wednesday as investors welcomed another Fed rate hike as a sign that central banks are rushing to campaign to combat rising inflation Led.

In a widely anticipated move, the central bank raised key interest rates by three-quarters, the highest level since 2018.

At a news conference, Chair Jerome Powell suggested that the Fed’s rate hikes had already slowed the economy to some extent and perhaps eased inflationary pressures. Some Wall Street people thought the Fed might not need to raise rates so aggressively in the coming months, which could cause a backlash in the last hour of regular trading. ..

The S & P 500 surged 2.6% and the technology-intensive Nasdaq surged 4.1%. This is the biggest rise in more than two years. The Dow Jones Industrial Average rose 1.4%. Stock prices for small businesses also rose, with Russell 2000 up 2.4%.

Bond yields have fallen sharply since the announcement of the Federal Reserve Board. The two-year Treasury yield, which tends to move in line with Federal Reserve expectations, fell from 3.06 percent late Tuesday to 2.98 percent. The 10-year yield, which affects mortgage rates, fell from 2.79 percent to 2.77 percent.

If interest rates rise, like Wednesday, the fourth time this year, borrowing will be higher and the economy will slow down. The hope is that the Fed and other central banks can cleverly find the midpoint that the economy is slowing enough to curb inflation, but not enough to cause a recession.

Jay Hatfield, CEO of Infrastructure Capital Advisors, said: “The statement is somewhat dovish, boosting the tech-led rise in stock prices that began this morning.”

Some Wall Street analysts weren’t optimistic that the Fed could choose a milder rate hike from here, especially as inflation accelerated to 91%. This is the fastest annual pace in 41 years.

Charlie Ripley, senior investment strategist at Allianz Investment Management, called the increase a “just cause.”

“That said, recent economic data has given us a higher degree of uncertainty about our policy path as we move forward from here,” Ripley said.

In a note on Wednesday, City analysts said Powell said a slowdown in hiking was appropriate at some point, but that was the exact time it could remain undecided. I wouldn’t consider it a dovish comment in particular. “

“We expect the Fed to raise rates more aggressively than expected due to core inflation,” analysts said, adding that the Fed announced a further three-quarter point hike at its September policy meeting. He said he expects rate hikes to continue. In early 2023.

The S & P 500 rose 102.56 points to 4,023.61. The Dow rose 436.05 points and closed at 32,197.59. The Nasdaq rose 469.85 points to 12,032.42 and the Russell 2000 finished at 1,848.34 with 43.09 points. The index is now all in tune with the weekly rise, extending Wall Street’s strong July rebound. The S & P 500 has risen 5.3% so far this month.

It’s not uncommon for stocks to rise and sell out the next day when the Federal Reserve issues a new interest rate policy statement.

Stock prices have been volatile this week, primarily driven by stronger-than-expected reports on corporate earnings.

But inflation is still at the forefront of investors’ minds. The market became eerie on Monday after retail giant Wal-Mart warned that rising food and gas prices were damaging profits.

Mid-quarter retailer profit warnings were rare and raised concerns about how the highest inflation in 40 years was affecting the retail sector as a whole.

Meanwhile, parts of the economy, especially the housing industry, have already slowed as the Fed raised interest rates. Previously occupied US home sales slowed for the fifth straight month in June as mortgage rates soared this year. Expectations for higher overall interest rates have boosted the Treasury’s yield for a decade, which affects mortgage rates.

Investors were looking at the latest batch of corporate earnings reports on Wednesday, including strong earnings from Google owner Alphabet and Microsoft.

Microsoft and Google’s parent Alphabet’s share has risen 6.7% and 7.7%, respectively, after the latest quarterly report. Boeing shares rose 0.1% after the aerospace company reported in the first quarter that it had delivered more planes than it had since the pandemic began.

Technology and telecommunications services stocks accounted for a large share of the S & P 500’s profits. Nvidia was up 7.6% and Netflix was up 6%.

Retailers, restaurant chains and other companies that rely on direct consumer spending have also helped lift the market. Chipotle Mexican Grill surged 14.7% after restaurant chains reported second-quarter earnings that exceeded analysts’ expectations.

Spotify Technology rose 12.2% after reporting that music streaming services exceeded Street’s expectations for monthly active users and premium subscribers.

The trader is working on the floor of the New York Stock Exchange in New York on Wednesday, July 27, 2022. (AP Photo / Seth Wenig)

US stocks skyrocket after Federal Reserve rate hikes

Source link US stocks skyrocket after Federal Reserve rate hikes

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