Stocks rebound as traders digest the Fed’s decision, Powell notes

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Stocks rebound as traders digest the Fed’s decision, Powell notes

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Stocks rose Wednesday afternoon as traders considered the Federal Reserve’s latest monetary policy decision, in which the central bank raised interest rates for the first time since 2018 in a move that matches market expectations. .

The S&P 500, Dow, and Nasdaq all rebounded in the past 30 minutes of trading after falling shortly after the Fed’s last policy decision released at 2pm ET. Treasury yields constructed on previous earnings. The yield curve reversed at one point when the yield on the shorter duration, more policy-sensitive 5-year note jumped above that of the 10-year note.

Investors took into consideration the Federal Reserve’s latest monetary policy decision, which showed the first of what is likely to be a series of interest rate hikes this year. The central bank raised rates by 25 basis points, with this increase in line with expectations.

Prior to Wednesday, the benchmark interest rate had been kept near zero since mid-2020, with the central bank using low rates and a host of other monetary policy tools to keep financial conditions running smoothly during the pandemic. The Fed last raised interest rates more than three years ago.

Fed Chairman Jerome Powell had already told Congress in recent weeks that he would support a 25 basis point hike in interest rates at the Fed meeting in March, starting the process of tightening financial conditions to gradually reduce demand and inflation. And by opting for a more aggressive 50 basis point rate hike – which some market participants had requested earlier in the year – the Fed also avoided shocking markets already rocked by the Russian invasion of Ukraine.

And most importantly, in addition to offering a rate hike decision, the Fed has also released an updated summary of economic projections, or “dot plot,” showing what central bank officials are thinking about where interest rates are. and the growth of the economy could be directed towards the short term.

The median member of the Federal Open Market Committee (FOMC) expects the Fed to raise interest rates up to six times this year, according to the dot plot. And this happens when the median member now expects basic personal consumption spending (PCE), or the Fed’s preferred inflation indicator after adjusting for food and energy price volatility, to end the year up by 4. 1%, up sharply from a December projection of 2.7%. This metric last increased at an annual rate of 6.1% in January. And since then, the most recent press releases on consumer and producer price inflation have indicated an even more marked rise in prices.

Major indices held gains on Wednesday even after a new retail sales report earlier in the morning showed a sharper-than-expected deceleration in consumer spending last month, with rising inflation starting to slow down. some discretionary purchases. Elsewhere, developments on the Russia-Ukraine crisis have looked increasingly positive. At least one Kremlin official reportedly gave an upbeat tone to discussions with Ukraine early Wednesday, helping to provide a boost to stocks recently rocked by geopolitical turmoil. Kremlin spokesman Dmitry Peskov suggested that a proposal to make Ukraine a neutral country while maintaining its military “could be seen as some kind of compromise,” Bloomberg reported Wednesday.

Energy prices have stabilized after easing recent gains. West Texas Intermediate Crude Oil futures (CL = F) briefly fell below $ 95 a barrel to fall further in a bear market before rising more than 1% intraday. Earlier this week, US crude oil entered bear market territory for the first time, with prices down more than 20% from the recent closing highs set just a week ago. Brent crude, the international standard, fell below $ 100 a barrel.

4:05 PM ET: Stocks Record consecutive hikes after Fed hikes rates as expected, signaling further hikes: Nasdaq jumps 3.8%, Dow adds 519 points, or 1.6%

Here are the main moves in the markets starting at 4:05 PM ET:

  • S&P 500 (^ GSPC): +95.41 (+ 2.24%) to 4,357.86

  • Dow (^ DJI): +518.76 (+ 1.55%) to 34,063.10

  • Nasdaq (^ IXIC): +487.93 (+ 3.77%) to 13,436.55

  • Raw (CL = F): from $ -1.40 (-1.45%) to $ 95.04 per barrel

  • Gold (GC = F): from $ -1.10 (-0.06%) to $ 1,928.60 per ounce

  • Ten-year treasure (^ TNX): +2.8 bps for a yield of 2.1880%

2:25 pm ET: Fed updates monetary policy statement to reflect Russia-Ukraine, reduce pandemic mentions

The Federal Reserve’s updated monetary policy statement Wednesday included a number of major language changes, including a notable drop in the number of mentions of the impacts the pandemic is having on the economy. Instead, the central bank drew attention to renewed concerns raised by Russia’s war in Ukraine.

“The invasion of Ukraine by Russia is causing enormous human and economic hardship,” states the new statement in the second paragraph. “The implications for the US economy are very uncertain, but in the near term the invasion and related events are likely to create further upward pressure on inflation and weigh on economic activity.”

The Fed also removed a mention from the January statement that “the path of the economy continues to depend on the course of the virus”.

2:18 PM ET: Shares fall after Fed hikes interest rates, revising inflation expectations upward

Here’s where the markets were trading as investors considered the Fed’s latest policy decision:

  • S&P 500 (^ GSPC): +17.57 (+ 0.41%) to 4,280.02

  • Dow (^ DJI): from -15.89 (-0.05%) to 33,528.45

  • Nasdaq (^ IXIC): +155.25 (+ 1.21%) to 13,106.28

  • Raw (CL = F): from $ -0.40 (-0.41%) to $ 96.04 per barrel

  • Gold (GC = F): from $ -16.50 (-0.86%) to $ 1,913.20 per ounce

  • Ten-year treasure (^ TNX): +7.5 bps for a yield of 2.235%

1:58 pm ET: Stocks hold direct earnings on Fed decision

The three major indices remained in positive territory shortly before the release of the Fed’s latest monetary policy decision.

The Nasdaq Composite outperformed, up 2.3%. The Dow added 272 points, or 0.8%, while the S&P 500 was up 1.3%. The 10-year Treasury yield added around 3 basis points to hover above 2.19%, or the highest since 2019.

10:46 am ET: Homebuilder sentiment drops to its lowest level since September

Sentiment among homebuilders fell to its lowest level in six months in March, with work stoppages and other supply-side disruptions now compounding as mortgage rates rise to put pressure on the housing market.

The National Association of Home Builders’ March Real Estate Market Index fell to 79 from a reading of 81 in February. Consensus economists were looking for another reading of 81 in March, according to Bloomberg consensus data.

“Builders are reporting growing concerns (up 20% over the past 12 months) and expect higher interest rates linked to tightening monetary policy will price potential homebuyers out of business,” said Robert Dietz, chief NAHB economist, in a statement.

9:33 am ET: Stocks open higher, jumping more than 1% after the opening bell:

Here’s where the shares were trading right after the market opened:

  • S&P 500 (^ GSPC): +45.38 (+ 1.06%) to 4,307.83

  • Dow (^ DJI): +365.46 (+ 1.09%) to 33,909.80

  • Nasdaq (^ IXIC): +183.07 (+ 1.41%) to 13,132.18

  • Raw (CL = F): + $ 1.47 (1.52%) to $ 97.91 per barrel

  • Gold (GC = F): from $ -10.50 (-0.54%) to $ 1,919.20 per ounce

  • Ten-year treasure (^ TNX): +0.3 bps for a yield of 2.163%

8:38 am ET: Retail sales decelerate in February, up 0.3% from 0.4% expected

US retail sales slowed more than expected in February after a revised upward leap in January, with inflation weighing on consumer sentiment and spending.

Retail sales were up 0.3% in February compared to January, the Commerce Department said Wednesday. This was less than the expected 0.4% increase, based on Bloomberg consensus data. however, January retail sales were heavily revised up to show a 4.9% increase in January, compared to the 3.8% increase previously reported.

Much of the February gain is related to gas station spending, up 5.3% during the month and 36.4% from February last year. Excluding car and gas prices, retail sales fell 0.4% month-on-month in February, versus an expected increase of 0.4%. Retail sales, excluding cars and gas, were up 5.2% in January compared to December.

Other categories saw significant drops in February. Non-in-store retailers, or e-commerce outlets, experienced a 3.7% drop in sales in February. Sales in health and personal care stores fell by 1.8%, and sales in furniture and home appliances stores fell by 1%.

7:08 am ET. Wednesday: Stock futures jump

Here’s where the markets traded on Wednesday morning:

  • S&P 500 futures (ES = F): +51.5 points (+ 1.21%) to 4,313.50

  • Dow futures (YM = F): +358.00 points (+ 1.07%) to 33,890.00

  • Nasdaq Future (QN = F): +238.00 points (+ 1.77%) at 13,689.75

  • Raw (CL = F): from $ -0.38 (-0.39%) to $ 96.06 per barrel

  • Gold (GC = F): from $ -6.10 (-0.32%) to $ 1,923.60 per ounce

  • Ten-year treasure (^ TNX): +0.2 bps for a yield of 2.162%

6:13 PM ET Tuesday: Mixed Stock Futures, Dow Futures earn over 250 points

Here’s where the shares traded on Monday morning:

  • S&P 500 futures (ES = F): -3.5 points (-0.08%) to 4,258.50

  • Dow futures (YM = F): -22 points (-0.07%) to 33,510.00

  • Nasdaq Future (QN = F): -1.5 points (-0.01%) at 13,450.25

NEW YORK, NEW YORK - MARCH 11: Traders work on the floor of the New York Stock Exchange (NYSE) on March 11, 2022 in New York City.  The Dow Jones Industrial Average rose more than 200 points in morning trading on the last day of a volatile week for global markets.  (Photo by Spencer Platt / Getty Images)

NEW YORK, NEW YORK – MARCH 11: Traders work on the floor of the New York Stock Exchange (NYSE) on March 11, 2022 in New York City. The Dow Jones Industrial Average rose more than 200 points in morning trading on the last day of a volatile week for global markets. (Photo by Spencer Platt / Getty Images)

Emily McCormick is a Yahoo Finance reporter. Follow her on Twitter

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