Stocks rebound as traders digest Fed decision, Powell remarks

Stocks rose Wednesday afternoon as traders considered the Federal Reserve’s latest monetary policy decision, in which the central bank hiked interest rates for the first time since 2018 in a move matching market expectations.

The S&P 500, Dow and Nasdaq rebounded in the final 30 minutes of trading after declining in the immediate aftermath of the Fed’s latest policy decision released at 2 p.m. ET. Treasury yields built on earlier gains. The yield curve inverted at one point as the yield on the shorter-duration and more policy-sensitive 5-year note jumped above that on the 10-year note.

Investors considered the Federal Reserve’s latest monetary policy decision, which showed the first of what will likely be a series of interest rate hikes this year. The central bank raised rates by 25 basis points, with this hike coming in-line with expectations.

Prior to Wednesday, benchmark interest rate had been kept near zero since mid-2020, with the central bank using low rates and a series of other monetary policy tools to keep financial conditions running smoothly amid the pandemic. The Fed last raised interest rates over three years ago.

Fed Chair Jerome Powell had already told Congress in recent weeks that he would back a 25 basis point interest rate hike at the Fed’s March meeting, beginning the process of tightening financial conditions to gradually bring down demand and inflation. And in opting against a more aggressive 50 basis point rate hike — which some market participants had called for at the beginning of the year — the Fed also avoided delivering a shock to markets already reeling from Russia’s invasion of Ukraine.

And importantly, in addition to offering a decision on raising rates, the Fed also released an updated Summary of Economic Projections, or “dot plot,” showing what central bank officials are thinking for where interest rates and growth in the economy may be headed in the near-term.

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The median member of the Federal Open Market Committee (FOMC) anticipates the Fed will raise interest rates up to six more times this year, according to the…

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