Wall Street closes with sharp gains after Fed’s interest rate hike

U.S. stocks ended sharply higher on Wednesday after the Federal Reserve delivered a widely expected interest-rate hike, and the S&P 500 recorded its biggest one-day percentage gain in nearly two years.

Stocks initially see-sawed after the announcement, then the indexes strengthened. The S&P 500’s advance of almost 3% was the strongest since May 18, 2020.

The Federal Reserve on Wednesday raised its benchmark overnight interest rate by half a percentage point and said it would begin shrinking the central bank’s $9 trillion asset portfolio next month in an effort to further lower inflation.

The U.S. central bank set its target federal funds rate to a range between 0.75% and 1% in a unanimous decision, with further rises in borrowing costs of perhaps similar magnitude likely to follow.

“It’s clear that they (the Fed) understand the need to contain the soaring prices,” said Greg Bassuk, chief executive at AXS Investments in Port Chester, New

York.

“Even as the Fed gets more aggressive with rate hikes, we still need to grapple with the geopolitical tensions, the ongoing COVID issues as well as these wideranging corporate earnings results. So not withstanding the Fed move, we think we’ll still see some more volatility ahead.”

Investors watched Powell’s news conference for fresh clues on how far and how fast the central bank is prepared to go in an effort to bring down decades-high inflation.

The Dow Jones Industrial Average (.DJI) rose 932.27 points, or 2.81%, to 34,061.06, the S&P 500 (.SPX) gained 124.69 points, or 2.99%, to 4,300.17 and the Nasdaq Composite (.IXIC) added 401.10 points, or 3.19%, to 12,964.86.

Concerns about a hit to economic growth due to a hawkish Fed, mixed earnings from some big growth companies, the conflict in Ukraine and pandemicrelated lockdowns in China have hammered Wall Street recently, with richly valued growth stocks bearing the brunt of the sell-off.