US Fed raises interest rates for the first time in 3 years and 3 months
Powells economy is strong… No stagnation and emphasis
Price controllable message… market cheer
Oil prices fall again on hopes of Ukraine crisis
Temporary relief… [New York = Correspondent Kim Jong-nam of E-Daily] The New York stock market in the United States rebounded sharply all at once. Investor sentiment sharply revived as Chairman Jerome Powell scoured the market as the Federal Reserve raised interest rates as expected. The decline in international oil prices also contributed to the bull market.
Powell mentions “the economy is strong” several times
According to Marketpoint on the 16th, the Dow Jones Industrial Average, which collects blue chips on the New York Stock Exchange on the 16th, closed at 34,063.10, up 1.55% from the previous trading day. The Standard & Poors 500 index, which focuses on large-cap stocks, rose 2.24% to 4357.86. The tech-focused Nasdaq index surged 3.77% to close at 13,436.55. In addition, the small-cap Russell 2000 index rose 3.14% to close at 2030.72.
The Chicago Options Exchange Volatility Index, also known as the Wall Street Fear Index, fell 10.59% to 26.67. It went down to the mid-20s and proved that the two-seam rebounded.
The market has paid the most attention to the results of the Feds March Federal Open Market Committee meeting. The Fed announced at 2 p.m. on the same day that it would raise the key interest rate by 0.25% to 0.50%, and the three major indexes lowered their gains. It is the first time in three years and three months since December 2018 that the Fed has raised its benchmark interest rate.
According to the economic outlook and dot chart released by the Federal Reserve, five out of 16 FOMC members predicted a seven-time rate hike this year. is the highest proportion. The Fed has set its benchmark interest rate forecast for the end of the year at 1.9%. Assuming that there is only one increase of 0.25 percentage points, this is the speed at which it can raise at every six FOMC meetings remaining this year. The possibility of a “big step” of raising 0.50 percentage points at a time is not small. The mayor was nervous that Chairman Jerome Powell might make more hawkish remarks.
However, Chairman Powell, who appeared at 2:30 pm, exuded the market by stating several times that “the US economy is still strong,” while discussing the uncertainty of the Ukraine crisis and the upside risk of inflation. By revealing the outline of the tightening schedule, such as the 7th base rate hike this year and the start of the balance sheet contraction in May, it removed uncertainty while clearly conveying the message that such tightening would not lead to a recession. There are even speculations that Chairman Powell acted like a saviour to anxious investors.
“Chairman Powell seems to be trying to convey the message that he is fighting inflation and that it is under Fed control,” said Kathy Jones, bond strategist at Charles Schwab.
“The tightening of the currency means the Fed believes the economy is on a strong footing,” said Mike Rowengart, managing director of investment strategy at Etrade.
WTI price declines for 3 consecutive trading days
A further drop in international oil prices amid expectations of a ceasefire between Russia and Ukraine also had a positive effect on TwoSim. On the New York Mercantile Exchange, the price of West Texas Intermediate crude for April delivery fell 1.5% to close at $95.04 a barrel. This is the lowest figure since the 25th of last month. It was the third consecutive day of decline.
In midday, news emerged that raised expectations for a ceasefire in Ukraine. Russian Foreign Minister Sergei Lavrov said on the same day that Russia was “seriously discussing the neutralization of Ukraine” and that “some provisions were close to an agreement.” “The two sides have very different positions, but they have started a compromise,” said Mikhail Podolyak, adviser to the Ukrainian presidential office. The Financial Times even reported that negotiating delegations from both sides were preparing a 15-point peace plan.
In the event of a soft landing in Ukraine, the stabilization of commodity prices will slow further rise in inflation, which could ease the pressures of a recession. This is good news for the stock market in the long run.
Stock markets in major European countries rose at the same time. The London Stock Exchanges FTSE 100 index rose 1.62% to close at 7291.68. The CAC 40 index of the Paris stock market rose 3.68 percent, and the DAX 30 index of the Frankfurt stock market rose 3.76 percent, respectively. The pan-European Euro Stoxx 50 index rose 4.05% to close at 3889.69.
However, some on Wall Street also point out that the rise in the index is too excessive. The fact that major indices in the New York Stock Exchange continue to rise and fall along with international oil prices, which have been riding on a roller coaster every day, can further increase volatility.
Commerzbanks commodities analyst Karsten Frich said, “Just as Brents surge to $140 a barrel was excessive, the current downtrend is also excessive.” A Wall Street bond advisor said, “I see the Nasdaqs sudden surge of nearly 4% as a temporary relief rally.”