September 28, 2022

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Powell raises half a percentage point

Powell raises half a percentage point

US stocks surged, posting their biggest one-day gain since 2020, after Federal Reserve Chairman Jerome Powell set investor concerns the central bank might consider it. Bigger increases in interest rates in the coming months.

Leading indicators initially changed little Wednesday after the Fed’s announcement That would raise interest rates by half a percentage point and start shrinking its $9 trillion asset portfolio next month. Investors were widely anticipating both decisions heading into the conclusion of the central bank’s policy meeting.

To the surprise of some, Mr. Powell said the Fed was not “actively considering” a 0.75 percentage point rate hike at a future meeting. Fed fund futures, which traders use to track interest rate expectations, had previously shown market rates with a 95% chance that the Fed would make such a move in June.

Stocks rose after Powell’s comments, as the Dow Jones Industrial Average finished 932.27 points, or 2.8%, at 34,061.06, posting its biggest one-day gain since November 2020. The S&P 500 jumped 124.69 points, or 3%, to 4,300.17 for its best day since May 2020, while the Nasdaq Composite added 401.10 points, or 3.2%, to 12,964.86.

All three indicators had fallen earlier in the day.

“There is a sense of relief,” said Christopher Smart, chief global strategist and president of the Barings Investment Institute.

With stocks and bonds volatile recently, many investors have been wary of the pace with which the Federal Reserve is tightening monetary policy. Markets will falter. Others are grappling with concerns that the central bank, which is raising interest rates quickly in an effort to de-inflationmay inadvertently push the economy into a recession.

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However, the Fed’s messaging helped ease investor anxiety, according to Mr. Smart.