Dow Jones Skyrockets 900-Plus Points After Federal Reserve Announces Interest Rate Hike
20:00 GMT 04.05.2022 (Updated: 20:53 GMT 04.05.2022)
© AP Photo / John MinchilloA U.S. flag waves outside the New York Stock Exchange, Monday, Jan. 24, 2022, in New York. Stocks are drifting between small gains and losses in the early going on Wall Street Tuesday, May 3, 2022 as investors await Wednesday's decision by the Federal Reserve on interest rates. The Fed is expected to raise its benchmark rate by twice the usual amount this week as it steps up its fight against inflation, which is at a four-decade high.
© AP Photo / John Minchillo
Earlier Wednesday, Federal Reserve Chair Jerome Powell appeared to downplay the central bank's decision to raise its key interest rate by 50 points--two times the usual amount. While the move amounted to the biggest interest rate hike since 2000, Powell signaled that a larger, 75-point hike was unlikely.
US markets appeared to respond positively to Fed Chair Jerome Powell's remarks on Wednesday, as sharp rallies were observed in the stock indices, including a 932-point (2.8%) increase for the Dow Jones Industrial Average. Wednesday's close represented the Dow Jones' best day since November 9, 2020, per CNN.
The S&P 500 held around a 3% increase by close on Wednesday, marking its best performance since May 18, 2020. CNBC reported that all 11 S&P 500 sectors were positive in the last hour of trading.
Meanwhile, the Nasdaq Composite observed its best day since February 24, 2022, growing by 3.2%.
"The market is applauding Chairman Powell’s comments that the economy remains strong thanks to solid corporate balance sheets and still cash-rich consumers," Quincy Krosby, of LPL Financial, told CNBC.
"Moreover, he suggested that perhaps the worst of the sharp move in inflationary pressures may be poised to ease."
The Federal Reserve Chair expressed confidence on Wednesday when he told reporters that the central bank's decision to accelerate rate hikes would likely assist in curbing inflation, while maintaining a robust economy.
"We need to do everything we can to restore stable prices as quickly and effectively as we can,” Powell said. “We think we have a good chance to do it without a significant increase in unemployment or a really sharp slowdown."
“The labor market has continued to strengthen and is extremely tight,” Fed Chair Jerome Powell says. “Labor demand is very strong. … Wages are rising at the fastest pace in many years.” pic.twitter.com/KH501n33Wq— Yahoo Finance (@YahooFinance) May 4, 2022
However, pandemic-related obstacles, including supply chain disruptions and the related economic fallout, still remain realistic obstacles for the Fed.
4 May 2022, 18:06 GMT
The Fed's 50-point increase came as double the interest rate raise handed down in mid-March, which was the central bank's first rate hike since 2018.