- US stocks jumped higher on Wednesday after the Federal Reserve increased interest rates by 0.25%.
- This was the first interest rate hike by the Fed since late 2018, and more are on the way.
- The median estimate among voting members of the Fed suggest a total of 7 rate hikes in 2022.
US stocks jumped on Wednesday after investors got their first interest rate hike from the Federal Reserve since late 2018.
The Fed raised the Fed Funds rate to a range of 0.25% to 0.50%. The range previously sat at 0.00% to 0.25% since the Fed cut rates amid the onset of the pandemic in March 2020. And more rate hikes are on the way, according to the Fed's dot plot, which tracks expectations from members of the Fed.
A potential for seven rate hikes could happen in 2022, according to the dot plot, with the Fed funds rate rising to just below the 2.00% level. That would mean an interest rate hike at every Fed meeting in 2022 as Fed chairman Jerome Powell attempts to put a lid on rising inflation.
Here's where US indexes stood at the 4:00 p.m. ET close on Wednesday:
- S&P 500: 4,357.86, up 2.24%
- Dow Jones Industrial Average: 34,063.10, up 1.55% (518.76 points)
- Nasdaq Composite: 13,436.55, up 3.77%
The Fed also said it will start to reduce its multi-trillion dollar balance sheet later this year, and some, including Fed President James Bullard, expect the potential for a 50 basis point rate hike rather than the traditional 25 basis point hike.
"[Bullard] has been the most hawkish member of the Fed for some time and there was likely a lot of sympathy for his position given the economy is growing strongly, is creating jobs in significant number and is experiencing the fastest rate of annual inflation for forty years," ING Economics said following the Fed's decision.
But uncertainty surrounding the recent spike in commodity prices and Russia's ongoing attack against Ukraine could ultimately lead to a policy pivot from the Fed if consumers and the economy start to weaken.
Ukrainian President Volodymyr Zelenskyy addressed Congress on Wednesday, asking the US government for a no-fly zone to protect its airspace from Russian attacks. But he also acknowledged US reluctance to enforce a no-fly zone, which could escalate the conflict between Russia and Western countries.
Chinese stocks like Alibaba and Tencent soared more than 20% on Wednesday after China's Vice Premier Liu He pledged support for policies that would benefit its stock market, and said that talks between the US and China on foreign listings have made progress.
Nickel markets reopened on Wednesday following a massive short-squeeze earlier this month that sent prices to more than $100,000 per ton. Nickel prices fell about 5% before trades were halted once again.
Oil prices entered a bear market earlier this week and are now well below their recent highs sparked by the ongoing conflict between Russia and Ukraine.
West Texas Intermediate crude oil fell as much as much as 1.22% to $95.26 per barrel. Brent crude, oil's international benchmark, fell as much as 1.85% to $98.06.
Bitcoin rose 4.22% to $40,820. Ether prices gained 4.74% to $2,746.
Gold fell as much as 0.45% to $1,921.10 per ounce. The yield on the 10-year Treasury added 2 basis points to 2.17%.