US stocks closed sharply higher after Wednesday’s Federal Reserve announced an expected rise in interest rates, the highest since 2000.
Stocks initially swayed after the announcement. Afterwards, the indices stabilized and rose more than 2.5% after the press conference of the president of the US central bank, Jerome Powell.
The Federal Reserve (fed) raised its benchmark overnight interest rate by half a percentage point on Wednesday and said it would start cutting the central bank’s $9 trillion asset portfolio next month in an effort to curb inflation.
The US central bank set its target federal funds rate at a range of between 0.75% and 1% in a unanimous decision, which is likely to be followed by further increases in borrowing costs of perhaps similar magnitude.
“Clearly they (the Fed) understand the need to contain price rises,” said Greg Bassuk, chief executive of AXS Investments in Port Chester, New York.
“Even as the Fed gets more aggressive with rate hikes, we still have to deal with geopolitical tension, the Covid-19 issues, as well as these far-reaching corporate earnings results. So despite the move in the Fed, we think we’re still going to see some more volatility.”
Investors were watching Powell’s news conference for new clues about how far and how fast the central bank is willing to go in its effort to reduce inflation that has been rising for decades.
The S&P 500 gained 124.69 points, or 2.99%, to 4,300.17 units, while the nasdaq it gained 401.10 points, or 3.19%, to 12,964.86. The Dow Jones Industrial Average it rose 932.27 points, or 2.81%, to 34,061.06 units.
The concern about the impact on economic growth due to the position of the Federal Reservemixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hit Wall Street recently, with growth stocks bearing the brunt of the selloff.
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