Markets stabilize after Fed announces interest rate hike

NEW YORK

Markets remain relatively stable after the Federal Reserve’s widely anticipated decision to raise interest rates to double the usual amount in an effort to fight inflation. The Fed also announced details on how it will begin trimming its huge holdings of Treasury debt and mortgage-backed securities, a tool the Fed has used to help hold down long-term interest rates. low. Bond yields pulled back a bit from their highs after the Fed released its latest policy statement on Tuesday afternoon, and gold prices rose. Stock indices rebounded, leaving the S&P 500 up 0.4% after briefly dipping into the red.

THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.

NEW YORK (AP) — Stocks were mixed and bond yields rose Wednesday ahead of a widely expected interest rate hike from the Federal Reserve. Oil prices rose as Europe moved towards banning Russian oil.

Crude oil prices rose 3.7% after Europe moved closer to an embargo on Russian oil as that country continues its war on Ukraine. Any embargo could strain oil supplies and push prices even higher. Exxon Mobil rose 1.7%.

Tech stocks fell. Cloud services provider Akamai Technologies plunged 11.1% after reporting weak first-quarter earnings and revenue. Many companies in the sector have expensive stock values ​​and therefore have more strength to push the major indexes up or down.

Trading is mostly muted ahead of the Fed statement. The central bank is widely expected to raise its short-term policy rate to double the usual amount, or half a percentage point, as it steps up its fight against inflation. It has already raised its key overnight rate once, the first such hike since 2018.

“The economy is still very healthy, the consumer is pretty healthy and earnings are positive overall,” said Ryan Detrick, chief market strategist for LPL Financial. “The Fed will raise rates knowing that the economy can withstand it and avoid a recession.”

The S&P 500 was up 0.1% at 12:23 p.m. Eastern. The Dow Jones Industrial Average rose 75 points, or 0.2, to 33,205 and the Nasdaq fell 0.5%.

Bond yields rose. The 10-year Treasury yield rose to 2.97% from 2.96% on Tuesday evening. It is hovering near its highest levels since late 2018.

Tupperware fell 33.8% after the direct seller of plastic storage containers and cosmetics withdrew its financial guidance for the year after a very disappointing first quarter. The company cited pressure from inflation, lockdowns in China and conflict in Ukraine.

Chipmaker Skyworks Solutions fell 10.7% after giving investors a weak financial forecast as China’s strict COVID-19 lockdown measures hurt production.

Lyft plunged 34% after the ride-hailing company gave investors a disappointing revenue forecast for its current quarter.

Several companies were rewarded for their results. Airbnb rose 1% after the short-term home rental company cut its first-quarter loss sharply and gave investors an encouraging revenue forecast. Starbucks jumped 5.9% after reporting surprisingly strong sales at stores open for at least a year, which is a key measure of retailer health.

The Fed’s aggressive move to raise interest rates comes as rising inflation puts increased pressure on businesses and consumers. Higher costs for energy and other raw materials have prompted many companies to raise prices and issue cautious forecasts to their investors. Wall Street and economists worry that rising prices for everything from food to gasoline and clothing will cause consumer spending to slow and dampen economic growth.

Concerns have increased with Russia’s invasion of Ukraine and its impact on energy and major food prices. China’s increasingly stringent lockdown measures due to rising COVID-19 cases have also added concerns about slowing economic growth due to supply issues and shipping backlogs. .

Wall Street is watching economic data closely for any signs of slowing inflation. Consumer prices jumped in March, but a measure of inflation that excludes food and energy posted its smallest monthly increase since September. It was a welcome sign for investors and more of the same in the months to come, concerns over cold inflation.

“If we can get a few more readings showing a slowdown in inflation, that might be the game that gets some confidence,” Detrick said.