Stocks soared to their biggest gain in two years Wednesday and bond yields dropped after Federal Reserve Chair Jerome Powell downplayed the likelihood of an even larger rate increase than the one announced Wednesday. That allayed concerns that the central bank was on its way to a massive increase of three-quarters of a percentage point at its next meeting in June. The comments came after the Fed announced a half-point increase in its benchmark rate as part of its effort to fight inflation. The S&P 500 rose 124.69 points, or 3%, to 4,300.17. The Dow Jones Industrial Average rose 932.27 points, or 2.8%, to 34,061.06. The Nasdaq rose 401.10 points, or 3.2%, to 12,964.86.
The latest move by the Fed had been widely expected, with markets steadying this week ahead of the policy update, but Wall Street was concerned the Fed might elect to raise rates by three-quarters of a percentage point in the months ahead, the AP reports. Powell said the central bank is "not actively considering" such an increase. Powell also said the economy can make it through rate increases without falling into a recession. "The economy is strong and well positioned to handle tighter monetary policy," he said, though he cautioned "it's not going to be easy."
Investors are worrying about whether the Fed can pull off the delicate dance to slow the economy enough to halt high inflation but not so much as to cause a downturn. Still, the market cheered the Fed's latest moves. "It’s certainly heady days when the market doesn’t blink at the most aggressive rate hike in 22 years, but keep in mind this was extremely well-telegraphed and priced in,” said Mike Loewengart, managing director, investment strategy at E-TRADE from Morgan Stanley.
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Energy stocks were among the biggest gainers Wednesday following a 5.3% increase in the price of US crude oil after Europe took a step closer to placing an embargo on Russian oil. Tupperware slumped 32.1% after the company withdrew its financial forecast for the year following a highly disappointing first quarter. Lyft plunged 29.9% after the ride-hailing company gave investors a disappointing revenue forecast for its current quarter. Starbucks jumped 9.8% after reporting surprisingly strong sales at stores that have been open at least a year, which is a key measure of health for retailers. (More stock market stories.)
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