Stocks rose Wednesday after the Federal Reserve delivered one other widely expected three-quarter point rate of interest hike and hinted at a possible shift in its tightening pace.
Stocks pared back earlier losses and gained following the afternoon Fed statement. The Dow Jones Industrial Average surged 300 points, or 0.9%. The S&P 500 and Nasdaq Composite last traded 0.5% and 0.7% higher, respectively.
The Fed implemented one other widely expected 0.75 percentage point rate increase, its fourth hike in a row of that caliber, because it battles high inflation and signaled a possible shift in its policy stance.
But more importantly, the brand new statement hinted at a possible policy change, saying the Fed “will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
“The initial response is investors were in search of some acknowledgment there’s two-way risk … they a minimum of opened the door for that,” said Keith Lerner, Truist’s chief market strategist. “That is why the market is rallying. They’ve done these super-sized rate hikes. That works with a lag. The market wants the Fed to maneuver away from that myopic give attention to inflation. They did that.”
Investors are also waiting for comments from Fed Chair Jerome Powell’s press conference kicking off at 2:30 p.m. for further clarity as as to if the central bank is prepared to slow the pace of its rate-hiking plan come December
Comments from the Fed and Chair Jerome Powell will play a key role in deciphering where stocks go within the months ahead and whether markets kick off a fresh bull run.
“Continuation of the year-end rally is contingent on the Fed delivering on the pivot narrative,” wrote Barclays’ Emmanuel Cau in a note to clients Wednesday. “Peak hawkishness may fuel more FOMO, but shouldn’t be confused with dovishness, as CBs proceed to walk a advantageous line. Rate cuts have been a precondition for equities to begin a recent bull market prior to now – we’re not there yet.”
The central bank’s decision comes after the discharge of strong jobs data, with better-than-expected private payrolls data for October painting a resilient labor market. The JOLTS report Tuesday also conveyed a decent jobs market despite the Fed’s aggressive tightening clip.
In other economic news, mortgage application data for last week got here in flat despite a slight tick lower in rates.
Earnings continued with strong results from CVS Health. Advanced Micro Devices rose despite a top and bottom line miss, and Boeing shares gained on strong money flow comments.
