Stocks rallied in a roller-coaster day of trading on Wall Street Wednesday after the Federal Reserve hiked interest rates by the biggest margin since 1994, but also said such mega-hikes would not be common. The Fed did signal that more increases are on the way as it tries to tackle the worst inflation in four decades. The increase of three-quarters of a percentage point was three times as big as the central bank usually makes. The S&P 500 rose 54.51 points, or 1.5%, to 3,789.99. The Dow Jones Industrial Average rose 303.70 points, or 1%, to 30,668.53. The Nasdaq rose 270.81 points, or 2.5%, to 11,099.15.
The S&P 500 rose in afternoon trading after several sudden moves up and down immediately after the Fed's announcement, the AP reports. Treasury yields were sharply lower but also jerked up and down as investors struggled to digest the third interest-rate hike of the year and what Chair Jerome Powell said about future moves. Powell said the Fed may consider an increase of either half a point or three-quarters of a point at its next meeting in July before increases may fall back to more normal amounts.
"The Fed is serious about inflation," says Brian Jacobsen, senior investment strategist at Allspring Global Investments. "Instead of trying to let it naturally fall they want to give it a good shove even if it means slowing growth" for the economy. Investments around the world, from bonds to bitcoin, have tumbled this year as high inflation forces the Federal Reserve and other central banks to swiftly remove supports propped underneath markets early in the pandemic. The hardest-hit have been the investments that soared the most in the easy-money era of ultralow interest rates, including high-growth technology stocks and cryptocurrencies. (More stock market stories.)
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