Nasdaq surges 4% in best day since April 2020 after Fed delivers expected interest rate rise
Despite the fact that Federal Reserve delivered a 75-basis-point rate hike for the second straight meeting, and its chairman Powell made an indication that a third such hike “could be appropriate” in September, US stocks rallied with Dow Jones Industrial Average turned modest gains into a big rally whilst the Nasdaq posted its biggest daily percentage gain since April 2020. S&P 500 too, closed highest level since June 8.
In addition, upbeat quarterly reports from Microsoft Corp and Alphabet Inc provided further encouragement about about the earnings season.
The latest rate hike by The Fed on the benchmark overnight interest rate, came on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.
While the Fed is putting its mandate to bring down inflation ahead of concerns about softening economic growth, Powell indicated the policymakers will proceed with care. His news conference offered a dash of optimism that the Fed can engineer a soft landing and a hint of dovishness that the inflation backdrop is improving.
The Dow Jones Industrial Average rose 436.05 points, or 1.37%, to 32,197.59, the S&P 500 gained 102.56 points, or 2.62%, to 4,023.61 and the Nasdaq Composite added 469.85 points, or 4.06%, to 12,032.42.
It should be noted that Wednesday’s hike was also well anticipated by investors and might be priced in the stock prices.
Microsoft rose 6.7% after it forecast double-digit growth in revenue this fiscal year on demand for cloud computing services. Alphabet jumped 7.7%, a day after it reported better-than-expected sales of Google search ads, easing worries about a slowing ad market.
Advancing issues outnumbered declining ones on the NYSE by a 5.27-to-1 ratio; on Nasdaq, a 3.15-to-1 ratio favored advancers.
The S&P 500 posted one new 52-week high and 30 new lows; the Nasdaq Composite recorded 50 new highs and 107 new lows.