NEW YORK-Wall Street recovered on Wednesday after the sharpest rise in interest rates by the Federal Reserve since 1994 and the subsequent guarantee that such mega-increases are not uncommon.
The S&P 500 rose 54.51 or 1.5% to 3,789.99 after being hit by roller coaster trading just after the Fed’s latest move in the fight against inflation.
In the same groundbreaking trade, bond yields in the bond market fell after President Jerome Powell appeared to have allayed market fears of the overly aggressive Fed by suggesting a more modest rate hike that could come later this year.
The Dow Jones Industrial Average ranged between a gain of 647 points and a loss of almost 180 before ending with a gain of 303.70. It closed at 30,668.53, an increase of 1%. The Nasdaq jumped 270.81, or 2.5%, to 11,099.15.
Market violence is a sharp reversal of the global loss that dominated much of the year, forcing the S&P 500 to carry the brand earlier this week. There is concern that high inflation will push the Fed and other central banks to slow down the economy and create an economy. Wednesday’s victory was the first for the S&P 500 in six days.
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Some analysts have warned that the rally may not last long because the economy is deep and high inflation and how uncertain the future course is. “The Powell table paints a pink picture that can be painted, and to achieve the picture he designed, this path must be many right,” said Yung-Yu Ma, head of strategic investment at BMO Wealth Management. “It’s a difficult journey and he realizes it.”
The Fed raised key short-term interest rates by one percentage point in three quarters on Wednesday, three times the normal move. Powell said the Fed could consider another large increase at its next meeting in July, but also said such an increase is “unusually large” and does not expect to be normal.
The Fed is “not trying to trigger a recession at the moment, let’s get this straight,” Powell said. He said Wednesday’s big move was part of the Fed’s acceleration in moving interest rates back to normal, and called it “front-end charging.”
“He has made it very clear to the US consumer that the Fed is taking it seriously and doing everything in its power to reduce inflation and maintain price stability,” said Quincy Krosby, chief equity strategist at LPL Financial. All types of investment, from bonds to bitcoins, have collapsed this year as high inflation has forced central banks to quickly remove cross-market support in the early stages of a pandemic. .
Although central banks are doing a bold trick to slow the economy down enough to curb inflation, without a recession, higher interest rates are pushing up investment prices no matter what happens. The hardest hit were investments that jumped in the easy period of ultra-low interest rates, including fast-growing technology stocks and cryptocurrencies.
Government bond yields reached its highest level in more than a decade of expectations of the more aggressive Fed this week, although they fell on Wednesday after Powell’s remarks. An unsatisfactory report showed that sales at US retailers fell unexpectedly between May and April. The economy has largely remained in the middle of a hot labor market, but has recently shown some signs of distress.
The Treasury’s two-year yield fell 3.21% from 3.45% on Tuesday, the biggest move after Powell said raising the percentage by 0.75 percent is unusual. The yield on the 10-year government bond returned 3.28% from 3.48%.
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“The bond market is now driving the wider market and this will continue,” said Jay Hatfield, CEO of Infrastructure Capital Advisors.
Cryptocurrency prices continued to fall and bitcoin fell to $ 20,087.90, almost 71% below its record high of $ 68,990.90 at the end of last year. According to CoinDesk, it fell by almost 1% in midday trading to $ 21,770.
Powell said on Wednesday that the Fed was moving “fast” to bring rates closer to normal levels after last week’s bizarre report that consumer-level inflation had unexpectedly accelerated last month. It surpassed Wall Street’s hopes that inflation had already risen.
A lot of bad news has come with a report on consumer sentiment, which shows that household expectations about future inflation are rising, which may trigger a vicious circle that increases it.
The war in Ukraine has helped raise oil prices because the region is a major energy producer. COVID infections in China, meanwhile, have led to factory closures and supply chain disruptions. All of this helped the S&P 500 withdraw more than 20% from its record high in early January, putting Wall Street in what investors call a bear market.
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Many of these concerns are still round and are likely to continue to push markets.
“Nothing is lost, nothing looks closer to the final match,” Ma BMO told Wealth Management. “Everyone still doesn’t seem so sure.”
However, shares also rose in Europe and parts of Asia on Wednesday. The German DAX returned 1.4% after the European Central Bank convened an unscheduled meeting to fear that rising interest rates were causing unrest in the continent’s bond market. The central bank has not provided a detailed plan, but says it will act against “fragmentation” as needed, as yields on some bonds in European countries are higher than in others.
Shares in Shanghai rose 0.5% after government data showed that Chinese manufacturing activity returned in May as anti-virus controls closing companies in Shanghai and other industrial centers eased.