Stocks fall, then rise as the Fed makes a rate decision

Stocks fall, then rise as the Fed makes a rate decision

US stocks rose in volatile trading on Wednesday afternoon as the Federal Reserve made another wild rate hike in its fight against stubborn inflation.

The US central bank raised its benchmark policy rate by 0.75% for the third time in a row, taking the fed funds rate to a new range of 3.0% to 3.25%, its lowest level. highest since 2008, from a current range between 2.25% and 2.5%. .

The benchmark S&P 500 index advanced 0.5%, while the Dow Jones industrial average gained 140 points. The tech-heavy Nasdaq Composite rallied 1%. Meanwhile, the CBOE Volatility Index (^VIX), Wall Street’s “fear” gauge, briefly spiked above 30 for the first time since July 1.

“Restoring price stability is essential to setting the stage for maximum employment and long-term stable prices,” Fed Chairman Powell said in his speech after the meeting. “We’ll keep doing it until we’re sure the job is done.”

Activity across the bond market was in the spotlight after the policy announcements. Treasury yields continued their dangerous climb on Wednesday, with the rate-sensitive 2-year Treasury note topping 4.1%, the highest level since 2007. The benchmark US 10-year note was remained above 3.5%, its highest level since 2011.

“You can only steer the ship into the storm for so long, but eventually there comes a time when you need to batten down the hatches and with the Fed’s third consecutive 75 basis point interest rate hike in the last four months, market participants should be vigilant.” cover to weather the coming storm,” said Charlie Ripley, senior investment strategist at Allianz Investment Management in a note. “Overall, today’s political action largely reflects the economic backdrop and to slow the economy, the The Fed clearly has to be aggressive.”

Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, U.S., on July 27, 2022. REUTERS/Elizabeth Frantz

Among the factors driving the market on Wednesday was General Mills (GIS), which rose nearly 6% after the company reported better-than-expected quarterly earnings and raised its full-year sales outlook as it benefits from higher prices for breakfast cereals, snack bars and pet food. .

Shares of Beyond Meat (BYND) gave up an earlier gain after announcing a partnership with Taco Bell (YUM) on its first menu collaboration: Beyond Carne Asada Steak. The news came after the meat substitute maker suspended chief operating officer Doug Ramsey over his arrest for allegedly biting off a man’s nose this weekend in a road rage incident.

Shares of Stitch Fix (SFIX) rallied and rose nearly 8% after the company reported disappointing fourth-quarter revenue expectations and sales guidance and posted a drop in active customers.

Across the Atlantic, Russian President Vladimir Putin announced a “partial mobilization” of Ukraine and promised to annex the occupied territories. In a televised message, he called the measures “urgent and necessary steps to defend Russia’s sovereignty, security and territorial integrity.”

The threat of an escalation in Russia’s war against Ukraine rattled markets. Oil prices rose, with West Texas Intermediate (WTI) crude futures rising 2.5% to $86.07 a barrel and Brent crude 2.4% higher at $92.81 a barrel. The dollar rallied to a new all-time high while the euro slipped. In the crypto markets, bitcoin (BTC-USD) fell below $19,000.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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