Wall Street closes with sharp gains after Fed rate hike

(Reuters) – U.S. stocks ended sharply higher on Wednesday after the Federal Reserve raised a widely expected interest rate hike and the Standard & Poor’s 500 posted its biggest one-day percentage gain in nearly a year.

Stocks initially fell after the announcement, then the indices strengthened. The S&P 500’s 3% advance was the strongest since May 18, 2020.

The US Federal Reserve on Wednesday raised its benchmark overnight interest rate by half a percentage point, and said it would start reducing the central bank’s $9 trillion asset portfolio next month in a bid to bring down inflation further.

The US central bank set the target federal funds rate in a range of 0.75% to 1% in a unanimous decision, and further hikes in borrowing costs of similar size are likely to follow.

“It’s clear that they (the Fed) understand the need to contain higher prices,” said Greg Pasock, CEO of AXS Investments in Port Chester, New York.

“Although the Fed is getting more aggressive with rate hikes, we still need to contend with geopolitical tensions, ongoing COVID issues as well as broad corporate earnings results. So, regardless of the Fed’s move, we think we will see more future volatility.

Investors have been watching Powell’s press conference for new clues about how far and how quickly the central bank is willing to go in an effort to bring down decades-high inflation.

Dow Jones Industrial Average (.DJI) It rose 932.27 points, or 2.81%, to 34,061.06, the Standard & Poor’s 500 . (.SPX) It rose 124.69 points, or 2.99%, to 4,300.17 points, and the Nasdaq Composite (nineteenth) It added 401.10 points, or 3.19%, to 12,964.86.

Concerns about economic growth being hit by Fed hawks, mixed earnings from some of the big growth companies, the conflict in Ukraine and pandemic-related shutdowns in China have battered Wall Street recently, with value-rich growth stocks bearing the brunt of the sell-off.

Two separate sets of data showed that private sector employers hired the fewest workers in two years last month, while expansion in the service sector unexpectedly lost some momentum in April. Read more

Lyft Company (LYFT.O) Shares fell 30% on concerns about the company’s passenger rate and spending. The passenger services company reported first-quarter revenue of $875 million, an increase of 44% from a year earlier, while the number of active riders was not what analysts expected.

Starbucks Corporation (SBUX.O) It rose 9.9% after the coffee shop chain saw comparable quarterly sales growth of 12% in North America. Read more

Levent Corp. (LTHM.N) It gained 30.2% after posting better-than-expected quarterly profit and boosted revenue forecasts for 2022 with increased demand for lithium used in electric vehicle batteries. Read more

All 11 major S&P sectors rose, with energy (.SPNY) driving gains.

Bank shares rose 3.5% after US 2-year Treasury yields, which are most sensitive to the Federal Reserve’s interest rate expectations, rose to their highest since November 2018. The benchmark 10-year yield exceeded 3% for the third day in a row.

Volume on US exchanges was 13.46 billion shares, compared to an average of 11.97 billion for the full session over the last 20 trading days.

Advance issues outnumbered declining issues on the New York Stock Exchange by 3.98 to 1; On the Nasdaq, a 2.39 to 1 ratio favored advanced traders.

The S&P 500 hit a 52-week high and 37 new lows. The Nasdaq recorded 28 new highs and 360 new lows.

Additional reporting by Eko Wang and Chuck Mikolajchak in New York and Devik Jain in Bengaluru; Editing by Shunak Dasgupta, Anil de Silva and Cynthia Osterman

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