Wall Street rallies after Fed’s assurance on rates

S&P shows gain for first time in six days

NEW YORK — Wall Street rallied Wednesday following the Federal Reserve’s sharpest hike to interest rates since 1994, and its later assurance that such megahikes would not be common.

The S&P 500 climbed 54.51, or 1.5%, to 3,789.99 after whipping through roller-coaster trading immediately following the Fed’s announcement. In equally topsyturvy trading, Treasury yields eased in the bond market after Chair Jerome Powell seemed to soothe the market’s fears about an overly aggressive Fed by implying more modest rate increases may be coming later this year.

The Dow Jones Industrial Average swung between a gain of 530 points and a loss of nearly 180 before finishing with a gain of 303.70. It closed at 30,668.53, up 1%. The Nasdaq composite jumped 270.81, or 2.5%, to 11,099.15.

The market’s ebullience was a sharp turnaround from the worldwide rout that has dominated much of this year, which forced the S&P 500 into a bear market earlier this week. The fear has been that high inf lation will push the Fed and other central banks to clamp the brakes too hard on the economy and create a recession. Wednesday’s gain was the first for the S&P 500 in six days.

Some analysts cautioned the rally could be short-lived given how deeply and broadly high inflation has seeped into the economy and how unsettlingly uncertain the future path is.

“Chair Powell painted as rosy a picture as could be painted, and to achieve that picture that he is laying out, that pathway, a lot has to go right,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “It’s a challenging path, and he acknowledged that.”

The Fed on Wednesday hiked its key short-term interest rate by three-quarters of a percentage point, triple the usual move. Powell said the Fed may consider another increase that big at its next meeting in July, but he also said such a hike is “an unusually large one” and not to expect it to be common.

The Fed is “not trying to induce a recession now, let’s be clear about that,” Powell said. He said Wednesday’s big increase was about the Fed speeding up the move to get interest rates back to normal, calling it “front-end loading.”

“He’s making it extremely clear to the market, to U.S. consumers, that the Fed takes this seriously and is doing whatever it takes to take inflation down and maintain price stability,” said Quincy Krosby, chief equity strategist for LPL Financial.