Relief after Fed decision: Wall Street sets off fireworks after interest rate hike

Relief after Fed decision
Wall Street sets off fireworks after interest rate hike

The Fed chief predicts a soft landing for the US economy. Although Powell has just announced a drastic rate hike, the relief on Wall Street is setting fireworks on prices. Early economists are already warning against too much euphoria.

Wall Street initially found it extremely difficult to develop a mid-week trend. But then US Federal Reserve Chairman Jerome Powell set off fireworks for stocks and bond quotes as the dollar suffered. The Fed is not currently considering raising interest rates by 75 basis points, Powell said after the interest rate decision. But the majority of market players had bet on such a “big” rate hike ahead of the next Fed meeting.

The US Federal Reserve had previously tightened its monetary policy as planned and raised its key rate by 50 basis points. In addition, the bloated balance sheet must be reduced – bond holdings must be sold. Economists had forecast a rate hike of 50 basis points. With the prospect that the Fed will not increase the current pace of future rate hikes, the coup Dow Jones index by 2.8% to 34,061 points, S&P500 and Nasdaq Compound increased by 3.0 and 3.2% respectively. A total of 2691 (Tuesday: 2027) price winners and 624 (1293) losers were counted on Wall Street, 123 (111) stocks closed unchanged.

The Fed Chairman also said he was confident the US economy would experience a “soft landing” and a recession could be avoided. The day’s economic data, which played no role in determining prices, was already pointing to a slowing in the expansion of the US economy. “In the early 1990s, we were able to get through a rate hike cycle and avoid an economic downturn. In all honesty, that was the only time in the last five rate hike cycles that we had a landing in gentle,” Ameriprise Financial warned. chief economist Russell Price not getting too excited about the rate hike Failed to raise interest rates more than 75 basis points.

The dollar is under pressure with the statements of Powell

US Dollars / Euros .94

The prospect of a few bold rate hikes weighed on dollar, the dollar index lost 0.8%. In the bond market, quotes rose sharply with Powell’s statements, yields fell, especially for shorter maturities. The price of gold rallied significantly during the day, supported by falling market interest rates and a weaker dollar.

the Oil prices however, greatly increased. The EU wants to take the Russian oil embargo seriously, although three states – Hungary, Slovakia and the Czech Republic – have raised objections. However, the EU wants to introduce an exception for these states so that the import ban applies to other EU states. This reduced supply, which fueled prices. The fact that crude oil inventories in the United States, contrary to expectations, according to US government data, did not decline does not dampen the rise in oil prices. This is also explained by the fact that gasoline stocks have fallen more significantly.

Reporting season sets the tone

Airbnb 146.40

Rising oil prices boosted corresponding sector stocks (+4.1%), semiconductor stocks (+4%) benefited from falling bond yields. Moreover, the reporting season determined the events. AdvancedMicro devices (AMD) rose 9.2%. The chipmaker posted record sales and also raised its full-year outlook. However, the price was also supported by falling market interest rates.

Starbucks (+9.8%) increased its sales and profits in the second fiscal quarter. Airbnb (+7.7%) turned more over the first three months of 2022 and contained the loss more than expected. The American biotechnology company Modern (+5.8%) had gained and implemented much more than expected in the last quarter. Moderna generated most of its revenue from the sale of the Covid-19 vaccine.

light slumped nearly 30% after the transportation service provider significantly beat expectations in the first quarter but disappointed with profit and sales forecasts. Share price of competitor Uber fell 4.6%. Uber more than doubled its revenue in the first quarter. The end result, however, was a loss of billions due to investments.

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