Dow climbs 650 points, stocks rally after Fed fires off biggest rate hike since 2000

US stock indexes traded near session highs on Wednesday afternoon, after the Federal Open Market Committee introduced its first 50-point rise in interest rates since 2000 and outlined plans. to reduce its balance sheet by about $ 9 trillion.

Oil prices rose on the news that the EU has proposed a ban on Russian oil.

How are shares listed?
  • The Dow Jones Industrial Average DJIA,
    + 2.33%
    rose 666 points, or 2%, to 33,791

  • The S&P 500 SPX,
    + 2.42%
    rose 84 points, or 2%, to 4,259

  • The Nasdaq Composite rose 250 points, or 2%, to 12,812.

On Tuesday, the Dow Industrial DJIA,
+ 2.33%
rose 67.29 points, or 0.2%, to close at 33,128.79, the S&P 500 SPX,
+ 2.42%
gained 0.5% to finish at 4,175.48. The Nasdaq Composite COMP,
+ 2.52%
added 0.2% to finish at 12,563.76.

Reads: “Bubble stocks appeared,” but it’s still not safe to buy them, says Ray Dalio, founder of the world’s largest hedge fund.

What drives the markets?

The Federal Reserve pulled the trigger on a half-percentage-point rise in interest rates, as expected, and announced the start of a “quantitative adjustment” or cut its balance sheet by about $ 9 trillion. dollars.

See: Fed raises interest rate by 1/2 point and launches $ 9 trillion bond sale in June

The measure was the largest in the U.S. central bank since 2000, when President Bill Clinton occupied the White House, and comes when Fed Chairman Jerome Powel works to cool hot inflation without causing an economic recession.

The central bank also described a process to reduce its balance sheet, first by $ 47.5 billion a month from June, but rising to $ 95 billion a month.

Powell spoke of a strong economy, but also of the pain consumers have felt at the grocery store and gas station at the afternoon’s press conference, saying the highest interest rates are the cure. .

To that end, Powell said additional increases of 1/2 percentage point should be on the table at later meetings, but ruled out an increase of 75 basis points for the time being.

According to some analysts, the Fed’s clarity on the size and scope of future rate hikes could give a boost to harassed stocks.

“Honestly, I think this hiking cycle is going to be a little shorter than the market is putting the price on right now,” Bill Callahan, Schroders’ investment strategist, said over the phone after the Fed’s decision.

“I think the Fed is seeing a slowdown in economic data and I think they’re raising rates now as soon as possible so they have some ammunition to cut on the other side.”

Russell Price, chief economist at Ameriprise Financial, said the question is what factors Fed officials will have at stake in terms of how long to continue with 50 basis point increases.

“In the early 1990s, we were able to go through a cycle of rate hikes and avoid an economic recession,” he said by telephone. “Honestly, it’s the only time we’ve got a smooth landing in the last five cycles of interest rate hikes.”

Bryce Doty, senior portfolio manager at Sit Fixed Income, expected Powell to embark on an aggressive path to tighter financial conditions, but warned that “there will be more pain as yields continue to rise,” even with ” the carnage that investors incur in bonds “. so far this year. ”

“While the worst may have happened in terms of bond market losses with Bloomberg’s aggregate bond index 9.5% in the first four months of the year, inflation remains a problem.” , Doty said in comments emailed Wednesday.

The performance of the 10-year Treasury note TMUBMUSD10Y,
fell 4 basis points to 2.92%, while that of TMUBMUSD02Y at 2 years,
fell from 10 basis points to 2.65%.

There was also a lot of U.S. economic data, with private payrolls rising by 247,000 in April, according to the ADP National Employment Report released on Wednesday. Economists surveyed by the Wall Street Journal had predicted an increase of 390,000 jobs in the private sector.

“In April, the recovery in the labor market showed signs of slowing down as the economy nears full employment,” said Nela Richardson, chief economist at ADP.

The U.S. trade deficit also rose 22.3 percent to a record $ 109.8 billion in March, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis said on Wednesday. U.S. imports rose 10.3% to $ 351.5 billion, while U.S. exports rose 5.6% to $ 241.7 billion in March.

In addition, the index of purchasing managers of the Institute of Supply Management of the services sector showed a weaker growth in new orders and employment, with a figure that fell to 57.1% in in April from 58.3%, below the forecast.

Oil was also focused, with prices for both Brent BRN00 and Brent
+ 0.24%

+ 0.24%
and crude West Texas Intermediate CL00,
+ 5.41%

+ 5.41%

+ 5.41%
5% each after the European Union proposed banning imports of Russian oil under a six-month phased plan and refined products in one year.

The measure would be part of a sixth batch of EU sanctions against Russia for its invasion of Ukraine that began in late February.

Investors are also digesting a new batch of business gains on Wednesday as well, with expected results from eBay Inc. EBAY,
+ 0.22%
and Etsy Inc. ETSY,
+ 3.76%,
among others, after closing.

Which companies are in focus?
  • Actions of Moderna Inc.
    + 4.86%
    rose 4%, although the company broke Wall Street earnings and revenue expectations for the quarter.

  • Lyft Inc.
    Shares fell 31% after the travel group reported a better-than-expected first quarter, but the earnings and sales guide disappointed. Rival actions Uber Technologies Inc.
    it fell about 5.2% after the company posted a net loss of $ 5.9 billion in the first quarter due to its investments in three other companies.

  • Chinese transport company Didi Global Inc.
    US deposit receipts fell 1.2% after the company said it was under investigation by the Securities and Exchange Commission over its 2021 IPO.

  • Herbalife Nutrition Ltd.
    it fell nearly 6.5% to a two-year low after the multilevel marketing company announced forecast reductions due to new “distributors.”

  • Airbnb Inc.
    + 6.25%
    shares rose 5% after the accommodation booking company reported results that exceeded expectations and said it exceeded 100 million nights booked in a quarter for the first time.

  • Match Group Inc.
    + 6.70%
    Shares fell 5.8% after the online dating company’s revenue outlook did not live up to expectations.

  • Starbucks Inc.
    + 10.67%
    Shares rose 10.2% after the coffee giant reported online earnings amid rising costs and lower inflation and margins. CEO Howard Schultz said the “record” demand was helping to accelerate store growth plans.

  • Advanced Micro Devices Inc.
    + 8.21%
    Shares rose 6.5% after the semiconductor company first reported more than $ 5 billion in quarterly revenue on Tuesday.

How were the other assets?
  • ICE US Dollar DXY Index
    a measure of the currency against a basket of six major rivals, fell 0.9%.

  • GC00 Gold Futures,
    + 0.89%
    slipped, with gold for June delivery GCM22,
    + 0.89%
    loses 0.1% to settle at $ 1,868.80 an ounce.

  • Bitcoin BTCUSD,
    + 5.62%
    increased 6.3% to $ 40,000.

  • In European equities, the Stoxx Europe 600 SXXP,
    closed 1.1%. FTSE 100 UKX London,
    it was down 0.9%.

  • In Asia, the Hang Seng HSI Index,
    fell 1.1% in Hong Kong, while many other Asian markets remained closed for holidays.

– Barbara Kollmeyer contributed to the report

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