Inside the New York Stock Exchange © Reuters = News 1
Reporter Shin Ki-rim = The U.S. stock market surged for two days in a row. Although the central banks Federal Reserve has come up with a stronger-than-expected rate hike plan, it has been interpreted to mean that the US economy is strong enough to withstand it.
Stocks rallied as optimism increased that a ceasefire agreement could be reached in days between Russia and Ukraine.
◇ Powells US economy is strong… downturn next year
On the 16th, the Dow recorded 34,063.10, up 518.76 points from the battlefield.
The Standard & Poors 500 surged 95.41 points to 4357.86.
The Nasdaq Index rose 487.93 points to close at 13,436.55.
The stock market retreated a bit on the day after an aggressive rate hike decision, but was boosted by the optimism of Fed Chairman Jerome Powell.
Fed Chairman Powell stressed that the US economy is strong enough to withstand monetary tightening during a briefing after the Federal Open Market Committee at a policy-making meeting.
The FOMC raised the benchmark interest rate for the first time in more than three years since December 2018, and Chairman Powell repeated twice that the economy is very strong, noting that job demand is very strong.
He also dismissed the prospect of a recession in the U.S. as low. He said the odds of going into a recession within the next year were not particularly high.
The good financial situation for individuals and businesses could help absorb the Feds rate hike, Powell said.
◇The first rate hike since 2018… 6 more times this year
The FOMC raised interest rates for the first time since December 2018. The interest rate, which was at the zero level, rose by 25 basis points to 0.25% to 0.5%. For the rest of this year, interest rates will rise six more times, 150 basis points.
The dot chart showing interest rate forecasts pointed to 7 hikes in 2022 this year and 3 hikes in 2023 next year. The base rate will rise to 1.75-2% by the end of this year. Compared to the dot plot in December of last year, it has become much more hawkish. Three months ago, interest rate hikes were expected three times this year.
The stock market retreated for a while after the FOMC decision to announce an aggressive rate hike, but resumed its strong upward trend starting with Chairman Powells press conference. Ahead of the FOMC, stocks rose on expectations of a ceasefire agreement between Russia and Ukraine. Oil prices continued to decline.
Monetary tightening stems from the Feds belief in a solid economic base, which in the end translates into good news, Mike Rowengart, head of investment strategy at Etrade, told Reuters.
The yield on the 10-year Treasury bond rose to the highest since 12019 right after the FOMC decision, and then fell. JP Morgan and Bank of America rose 4.4% and 5.1%, respectively, as bank stocks rose on the rise in interest rates.
Nine of the 11 sectors on the S&P 500 rose, excluding energy utilities. The increase was the largest in the order of consumer discretionary goods 3.35%, technology 3.32%, and telecommunication 2.93%.
Semiconductor Micron Technology jumped 8.9% and Starbucks rose 5.1% after JP Morgans upward target price.