Fed Hike Raises Interest Rates Amid Ongoing Inflation Concerns
The US stock market held steady on Wednesday after the Federal Reserve raised interest rates for the first time in three years to combat high inflation. The S&P 500 rose 0.4%, while the Dow Jones Industrial Average was up by a mere 8 points, and the Nasdaq composite increased by 0.8%. The hike in interest rates aims to slow down the economy's growth and curb stock prices, but investors believe that the short-term pain will be worth it to control inflation.
The Fed also released forecasts showing that median members expect interest rates to be higher at the end of this year, next year, and the following one than previously expected. This move comes after a report on Wednesday morning showed that shoppers spent more at US retailers last month than economists anticipated, indicating that the economy remains strong enough to withstand higher rates.
The price of oil fell 2.9% to $105.58 per barrel, easing pressure from the bond market and contributing to the stock market's stability. The yield on the 10-year Treasury decreased to 4.94%, down from 5.00% late Tuesday. However, investors remain cautious due to the high pressure on rates, with Brent oil still above its pre-war price.
Stocks in the artificial-intelligence industry showed resilience after their earlier decline, with Nvidia rising 1.9% and Advanced Micro Devices climbing 4%. On the other hand, J.B. Hunt Transport Services plummeted 12.5% due to higher costs and expected earnings drop of 5-10% from the second quarter to the third.