NEW YORK : Main Wall Street stock indexes and U.S. Treasury yields rose on Wednesday after the U.S. Federal Reserve hiked interest rates and laid out an aggressive plan for further increases to combat inflation.
In a widely expected move, the Fed announced a quarter percentage point increase in the overnight federal funds rate, lifting that key benchmark from its near-zero level. It was the first rate increase since 2018.
The U.S. central bank also said it expects to begin unwinding its massive holdings of government bonds and mortgage-backed securities at an upcoming meeting.
“The Fed did not rock the boat. They increased rates like expected, they did lower GDP forecast this year, and upgraded inflation expectations but none of that was a surprise,” said Ryan Detrick, chief market strategist for LPL Financial in North Carolina.
After the Fed announced its rate hike decision, benchmark 10-year U.S. Treasury yields reached 2.246per cent, the highest since May 2019, before retreating to 2.192per cent.
Two-year note yields rose to 2.002per cent, further flattening the closely-watched yield curve
On Wall Street, the Dow, benchmark S&P 500 and Nasdaq all closed higher after choppy trading following the central bank’s moves. The gains were driven by stocks in the technology, financials and consumer discretionary sectors.
The Dow Jones Industrial Average rose 1.55per cent to 34,063.1, the S&P 500 gained 2.24per cent to 4,357.86 and the Nasdaq Composite added 3.77per cent to 13,436.55.
“It was nice to see some follow through of yesterday’s big gains. This is the first time we’ve had two big up days since the war started in Ukraine,” Detrick said. “With the Fed not rocking the boat, buyers stepped in to find values.”
The U.S. dollar fell. While the Fed unveiled a hawkish monetary policy stance, it did not deliver a tougher surprise that might have added to the greenback’s weeks-long momentum.
The dollar index, which had gained 3per cent since the start of the Russia-Ukraine war on Feb. 24 and 10per cent since May, dropped as much as 0.6per cent on Wednesday.
European stocks closed at more than two-week highs as fresh talk of compromise in the Russia-Ukraine conflict boosted market sentiment just as China promised to roll out more economic stimulus.
The pan-European STOXX 600 index rose 3.06per cent, while MSCI’s gauge of stocks across the globe gained 2.76per cent.
Oil lost ground for the fifth time in the last six days as traders reacted to hoped-for progress in Russia-Ukraine peace talks and a surprising increase in U.S. inventories.
Benchmark Brent settled below $100 per barrel at $98.02, down 1.9per cent, while U.S. West Texas Intermediate (WTI) crude ended fell 1.5per cent at $95.04 a barrel.
Safe-haven gold rebounded after falling to more than a two-week low earlier in the session.
Spot gold added 0.5per cent to $1,926.57 an ounce, while U.S. gold futures fell 1.02per cent to $1,908.90 an ounce.
(Reporting by Chibuike Oguh in New York; Editing by David Gregorio and Tim Ahmann)