Stocks were flat in volatile trading Wednesday after the Federal Reserve raised rates by three-quarters of a point and forecast more sizable rate hikes in its fight against inflation, actions widely expected by traders.
With the S&P 500 down more than 8% in the past month and 18% for 2022 heading into Wednesday’s Fed actions, stocks were already pricing in an aggressive tightening campaign by the Fed that could push the economy into a recession.
The Dow Jones Industrial Average last traded 45 points higher, or 0.2%, higher. The S&P 500 added 0.4%, and the Nasdaq Composite gained 0.7%.
Stocks were volatile as traders parsed through the rate decision and the latest comments from Powell’s press conference.
The Fed raised rates by 0.75 percentage point, or 75 basis points, as was widely expected, and said it expects its so-called terminal rate to reach 4.6% to fight persistently high U.S. inflation. That’s the rate at which the central bank will end its tightening regime. The central bank also indicated that it plans to stay aggressive, hiking rates to 4.4% by next year.
“You can only steer the ship towards the storm for so long, but eventually there comes a time when you need to batten down the hatches and with the Fed’s third consecutive 75 basis point rate hike over the past four months, market participants should be looking for cover to weather the upcoming storm,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
Treasury yields popped on the news. The 2-year rate, which hit its highest level since 2007, last traded at around 4.1%. The 10-year rate jumped to about 3.6%.