Markets rocket after Powell nixes larger interest rate hikes
S&P 500 has erased half of its hefty April losses so far this week
The Dow Jones Industrial Average surged more than 900 points and the S&P 500 had its biggest gain in two years Wednesday after Federal Reserve Chair Jerome Powell downplayed the likelihood of an even larger interest rate hike after announcing the sharpest rate increase since 2000.
The remarks, which came after the Fed announced its decision to raise its key interest rate by double the usual amount, 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 S&P 500 climbed 3 percent, its best day since May 2020. The benchmark index is now up 4.1 percent this week, which represents roughly half its monthly loss in April. The Dow jumped 2.8 percent and the Nasdaq climbed 3.2 percent. The indexes had all briefly been in the red earlier in the day.
Bond yields fell after the Fed’s announcement. The yield on the 2-year Treasury dropped to 2.64 percent from 2.78 percent late Tuesday, an unusually large move. The yield on the 10-year Treasury, which influences mortgage rates, fell to 2.93 per
cent from 2.96 percent. It had initially jumped to 3.01 percent until Powell’s remarks during a news conference.
The comments came shortly after the Fed said it raised its benchmark short-term interest rate by a half-percentage point, it’s most aggressive move since 2000, and signaled further large rate hikes ahead. The increase raised the Fed’s key rate to a range of 0.75 percent to 1percent, the highest point since the pandemic struck two years ago.
The S&P 500 rose 124.69 points to 4,300.17. The Dow climbed 937.27 points to 34,061.06. The Nasdaq gained 401.10 points to 12,964.86.
Smaller company stocks also posted solid gains. The Russell 2000 rose 51.07 points, or 2.7 percent, to 1,949.92.
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.
Powell eased those concerns, saying the central bank is “not actively considering” such an increase.