On Wednesday, there was a more than 1% increased recorded in the main indexes on Wall Street, thanks to gains in beaten down financial and growth stocks. Investors, meanwhile, were waiting to see the outcome of the policy meeting of the Federal Reserve and how high they would hike the interest rate to quell the soaring inflation.
Major Indexes Advance
Early trading saw 10 out of the 11 sectors of the S&P 500 index gain and 9 of them had risen by almost 1%. Consumer discretionary rose by 1.6% and financials went up by 1.7%, as they led the rest. The lone sector to decline was the energy sector, as it reported a drop of 0.5%. Some of the tech heavyweights, including Amazon.com Inc., Microsoft Corp, Alphabet Inc., Meta Platforms and Apple Inc., all recorded gains between 1.3% and 2.5%.
Traders have raised bets of a 75 basis points increase in the interest rate by the Federal Reserve. This is higher than the 50 basis points priced earlier, since inflation data shocked the markets when it turned out to be higher than expected. This big hike would put the policy rate of the Fed in the short-term between the range of 1.5% and 1.75%.
The central bank will make its announcement at 2 p.m. ET, and Fed Chairman Jerome Powell will also conduct a press conference half an hour later. Market analysts said that the Fed was going to go all hawkish in order to control the narrative and when it is done, the markets would certainly be relieved in the long term. As for the medium-term, such tight financial conditions would bring down equity valuations.
Global Equities Suffering
2022 has been a tough year for global equities because of concerns about soaring inflation, a slowdown in economic growth and increase in borrowing costs. On Monday, the S&P 500 entered bear market territory when it reported a 20% decline from its January 3rd’s closing high.
Data also showed a 3% drop in the US retail sales last month, as shortages led to a decline in purchases of motor vehicles. Gasoline prices also hit record highs, which saw spending in other sectors come down significantly. Economists had been expecting a 0.2% increase in retail sales for May.
Stocks and Indexes Rise
The Dow Jones Industrial Average had climbed by 1.04% or 315.84 points to reach 30,680.67. There was a 1.29% surge in the S&P 500 index, which saw it add 48.12 points to reach 3,783.60. As for the Nasdaq Composite, it had climbed up by 1.66%, which was a rise of 179.38 points to 11,007.73.
There was also a 2.4% surge in Goldman Sachs, as it led gains amongst the big banks. A 4.6% rise was recorded in Nucor Corp, after it said that strong steel demand could lead to upbeat profits for the current quarter.
A surge of 4.7% was also reported in Boeing Co, after test flights were conducted by China Southern Airlines Co Ltd. for the first time using the 737 MAX plane.