Traders work on the floor of the New York Stock Exchange (NYSE) in New York, USA, June 13, 2022. REUTERS / Brendan McDermid / File Photo
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- The Fed announced the largest interest rate increase since 1994
- Powell: Don’t expect 75 bps to be the norm
- The S&P 500 broke a five-session losing streak
NEW YORK, June 15 (Reuters) – The S&P 500 rose on Wednesday to halt the loss of five sessions, after a statement by Federal Reserve policy that raised interest rates to market expectations as the central bank seeks to fight rising inflation without sparking. recession.
The Federal Reserve raised its target interest rate by three-quarters of a percentage point, its biggest increase since 1994, and predicts a slowdown in the economy and rising unemployment in the coming months. Read more
Shares were volatile after the announcement, before rising sharply after President Jerome Powell told a news conference that either 50 basis points or 75 basis points were likely at the next meeting in July, but that he did not expect increases of 75 basis points to be common.
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“After the Fed chairman said there could be a similar increase of 75 basis points at the next meeting, then the market rose,” said Sam Stoval, chief investment strategist at CFRA Research in New York.
“It’s like a vote of confidence that the Fed has finally woken up to the inflation problem and is ready to take a more aggressive stance.”
According to preliminary data, the S&P 500 (.SPX) rose 52.77 points, or 1.41%, to finish at 3788.25 points, while the Nasdaq Composite (.IXIC) rose 269.40 points, or 2.49%. , to 11,097.74. The Dow Jones Industrial Average (.DJI) rose 289.39 points, or 0.95%, to 30,654.22 points.
Investors quickly raised expectations that the central bank will raise interest rates by 75 basis points (bps) in the last few days after stronger-than-expected consumer price reporting on Friday. Earlier, it was expected that the Fed would announce an increase of 50 basis points, a rapid change in expectations, which caused a forced sale on world markets. Read more
Fostering expectations of a larger rise were changes in the forecasts of analysts from major banks, including those at JP Morgan and Goldman Sachs, who both predicted an increase in interest rates by 75 basis points from the Fed. Since then, investors have rushed to re-evaluate their bets. Read more
Rising worries about rising inflation, higher borrowing costs, slowing economic growth and corporate profits have kept stocks under pressure for most of the year.
On Monday, the benchmark S&P 500 (.SPX) fell more than 20% since its last record high, confirming that the bear market began on January 3, according to a commonly used definition.
Earlier economic data on Wednesday showed that retail sales in the US unexpectedly fell by 0.3% in May, as motor vehicle purchases fell amid shortages and record high petrol prices withdrew costs from other goods, much less than expected, requiring an increase of 0.2%. Read more
“Most of the rising data points were negative, even this morning the retail sales were soft, so in just the last four business days you’ve had a number of negative economic numbers,” said Ellen Hazen, chief market strategist, FLPutnam Investment Management in Wellesley. , Massachusetts.
Among individual stocks, Citigroup (CN) rose as one of the best performers in the S&P 500 (.SPXBK) index, while Nucor Corp (NUE.N) rose after forecasting optimistic earnings for the current quarter in strong demand of steel.
Boeing Co (BA.N) rose after China Southern Airlines Co Ltd (600029.SS) conducted test flights with 737 MAX for the first time since March, in a sign that the return of the aircraft to China may be approaching as demand recovering. Read more
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Additional reports from Bansari Mayur Kamdar in Bengaluru; Edited by Aurora Ellis
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