Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 13, 2022. REUTERS/Brendan McDermid/File Photo
- The Fed announces the biggest rate hike since 1994
- Powell: Don’t expect 75 bps to be the norm
- The S&P 500 breaks into a losing streak after five sessions
- Dow up 1%, S&P 500 up 1.46%, Nasdaq up 2.50%
NEW YORK, June 15 (Reuters) – The S&P 500 rallied on Wednesday after a policy announcement from the Federal Reserve that raised interest rates in line with market expectations as the central bank tried to fight rising inflation without a recession.
The Federal Reserve raised its target interest rate by three-quarters of a percentage point, the largest rate hike since 1994, and forecast a slowing economy and rising unemployment in the coming months. Continue reading
Stocks were volatile following the announcement, before turning sharply higher after Chairman Jerome Powell said in his press briefing that either 50 basis points or 75 basis points is the most likely at the next meeting in July, but he doesn’t expect increases of 75 basis points to be mean .
“When the Fed chair said there could be a similar 75 basis point hike at the next meeting, the market rallied,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
“It’s a kind of vote of confidence that the Fed has finally recognized the inflation problem and is ready to take a more aggressive stance.”
The Dow Jones Industrial Average (.DJI) rose 303.7 points, or 1%, to 30,668.53, the S&P 500 (.SPX) rose 54.51 points, or 1.46%, to 3,789.99 and the Nasdaq Composite ( .IXIC) rose 270.81 points to 2.5% at 11,099.16.
The five-day losing streak for the S&P 500 was the longest since early January.
Investors were quick to raise expectations that the central bank would hike interest rates by 75 basis points (bps) in the past few days after stronger-than-expected consumer prices on Friday. Previously, it was widely expected that the Fed would announce a 50 basis point hike, a rapid rise in expectations that has sparked a sharp sell-off in global markets. Continue reading
The expectation of a larger rate hike was fueled by forecast changes from analysts at major banks, including those at JP Morgan and Goldman Sachs, who both forecast a 75 basis point rate hike by the Fed. Investors have since rushed to reevaluate their bets. Continue reading
Growing concerns about rising inflation, higher borrowing costs, slowing economic growth and corporate earnings kept stocks under pressure for most of the year.
On Monday, the benchmark S&P 500 (.SPX) index fell more than 20% from its recent record closing high, confirming that a bear market according to a commonly used definition began on Jan. 3.
Earlier Wednesday economic data showed that US retail sales unexpectedly fell 0.3% in May as auto purchases slumped amid shortages and record-high gasoline prices dragged spending away from other commodities, far below expectations, some said increase of 0.2%. Continue reading
“Most of the incremental data points were negative, even this morning retail sales were weak so you’ve had a bunch of negative economic numbers just in the last four business days,” said Ellen Hazen, chief market strategist, FLPutnam Investment Management in Wellesley, Massachusetts.
Among individual stocks, Citigroup (CN) rose 3.52% as one of the top performers in the S&P 500 Banking Index (.SPXBK), which gained 1.60%. Nucor Corp (NUE.N) rose 2.41% after forecasting an upbeat earnings for the current quarter on strong steel demand.
Boeing Co (BA.N) rose 9.46% after China Southern Airlines Co Ltd (600029.SS) conducted test flights on a 737 MAX aircraft for the first time since March, a sign that the jet’s return in China draws closer as demand picks up again. Continue reading
Volume on US exchanges was 13.40 billion shares compared to the average of 11.79 billion for the entire session over the past 20 trading days.
Rising issues predominated on the NYSE at a 2.80 to 1 ratio; on the Nasdaq, a 2.78 to 1 ratio favored movers.
The S&P 500 posted 1 new 52-week high and 41 new lows; the Nasdaq Composite posted 12 new highs and 258 new lows.
Additional reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Aurora Ellis
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