Stocks experienced significant volatility as the Federal Reserve raised interest rates, causing the transport and banking sectors to soar. The Dow Jones Industrial Average rose by 0.2 percent to 35,520.12, extending its winning streak to 13 sessions. However, the S&P 500 and Nasdaq ended the day narrowly mixed, with the former edging down by less than a tenth of a percent and the latter slipping by 0.1 percent. The Fed’s decision to raise rates came as they noted elevated inflation and robust job gains. However, Fed Chair Jerome Powell mentioned that the central bank could potentially raise rates again in September or maintain the current rate.
The announcement from the Federal Reserve triggered significant volatility in the stock market, with wild swings throughout the day. The decision to raise interest rates by 25 basis points brought the target range for the federal funds rate to 5.25 to 5.50 percent, the highest since early 2001. The Fed cited ongoing inflation and moderate economic expansion as the reasons for the rate increase.
During a post-meeting press conference, Fed Chair Jerome Powell revealed that the central bank plans to take a meeting-by-meeting approach when considering future rate hikes. He stated that the Fed will assess the need for further tightening as they evaluate incoming economic data. Powell also emphasized the importance of monitoring key inflation metrics before making any decisions.
The market reacted to the Fed’s decision with varied performances across sectors. Software stocks experienced substantial weakness, dragging down the Dow Jones U.S. Software Index by 2.6 percent. This decline was led by software giant Microsoft, which plunged by 3.7 percent due to disappointing revenue guidance for the current quarter, despite reporting better-than-expected fiscal fourth-quarter results.
Conversely, transportation stocks witnessed a significant increase, driving the Dow Jones Transportation Average up by 2.7 percent to its best closing level in over a year. Railroad operator Union Pacific experienced a spike of 10.4 percent following the announcement of the appointment of Jim Vena as chief executive officer. The banking sector also performed well, resulting in a 1.9 percent advance for the KBW Bank Index. PacWest Bancorp’s shares skyrocketed by 26.9 percent after the regional bank agreed to merge with Banc of California.
In overseas trading, Asian markets experienced mostly lower movement. Japan’s Nikkei 225 Index closed just below the unchanged line, while China’s Shanghai Composite Index fell by 0.3 percent. European markets also trended downward, with the French CAC 40 Index tumbling by 1.4 percent, the German DAX Index sliding by 0.5 percent, and the UK’s FTSE 100 Index dipping by 0.2 percent.
Looking ahead, trading on Thursday is likely to be influenced by the market’s reaction to the Federal Reserve’s decision. Additionally, reports on second-quarter GDP, durable goods orders, initial jobless claims, and pending home sales are expected to attract attention. Several companies, including Facebook parent Meta Platforms, Comcast, McDonald’s, and Honeywell, are set to release their quarterly earnings results.
In conclusion, the stock market experienced significant volatility as the Federal Reserve raised interest rates. While the Dow Jones Industrial Average continued its winning streak, the S&P 500 and Nasdaq ended the day narrowly mixed. The Fed’s decision came in response to elevated inflation and robust job gains. Despite the lackluster close of the broader markets, transportation and banking sectors saw substantial increases. The software sector, however, experienced weakness. The global market also witnessed varying performances, with Asian and European markets trending lower. Thursday’s trading is expected to be influenced by the market’s response to the Fed’s decision and various economic reports.
