NEW YORK (`) – Stocks are not moving much on Wall Street after the Federal Reserve’s latest rate hike. The S&P 500 was up 0.1% immediately after the Fed’s announcement. The move was widely expected and is expected to slow the economy in hopes of controlling inflation. Wall Street is hoping this will be the last rate hike, and the Fed may have hinted at that possibility in its statement. Fed Chair Jerome Powell will speak later this afternoon. The economy has already slowed and the US banking system is beginning to crack under the weight of much higher interest rates.
THIS IS A BREAKING NEWS UPDATE. `’s earlier story follows below.
NEW YORK (`) – Stocks drifted Wednesday ahead of what Wall Street is hoping will be the last rate hike for a long time.
The S&P 500 rose 0.1% in midday trade after falling the previous day. The Dow Jones Industrial Average fell 9 points, or less than 0.1%, to 33,675 at midday Eastern time, while the Nasdaq Composite was 0.3% higher.
Eli Lilly rose 5.4% after announcing encouraging results from a study into a treatment for Alzheimer’s disease, and bank stocks rebounded somewhat from the previous day’s sharp fall, while oil prices continued to fall. But the market spotlight is aimed squarely at the Federal Reserve, which is set to announce its latest move to combat high inflation later this afternoon.
The widespread assumption is that the Fed will raise its federal funds rate back to its highest level since 2007. What is more important is what indications the Fed is giving of forthcoming steps.
The hope on Wall Street is that this will mark the end of the Fed’s fastest string of rate hikes in decades, giving financial markets and the economy some breathing room. But the Federal Reserve is in a difficult position with no easy answer.
Higher interest rates have helped bring inflation down, but it’s still too high, hurting households trying to keep up. Low-income households have come under particular pressure. At the same time, high interest rates have also severely weakened parts of the economy and fueled fears of a recession later this year.
The banking system is feeling one of the heaviest stresses from high interest rates, and three of the four largest bank failures in US history have occurred within the last two months. Investors have been looking for other potential vulnerabilities, with small and medium-sized banks that could see sudden customer withdrawals coming under the closest scrutiny.
Shares of PacWest Bancorp, Western Alliance Bancorp and other peers rose on Wednesday, a day after trading in their shares halted amid steep price slides. PacWest was up 3.7% and Western Alliance was up 3.1%.
Some of the sharpest moves in the market have been with companies reporting results for the first three months of the year.
Kraft Heinz rose 4.4% after beating analysts’ forecasts for earnings and sales. Online dating company Match Group rose 2.1% after beating earnings expectations.
The majority of companies have so far made better profits than feared. However, given the impact of much higher interest rates and a slowing economy, expectations for this earnings season were low. The S&P 500 companies are likely still on track to report a second straight quarter of earnings declines.
Because of this, a lot of attention has been paid to what companies are saying about upcoming trends.
Advanced Micro Devices fell 8.6% despite reporting stronger-than-expected earnings and sales. It provided a sales forecast for the current quarter that fell short of some analysts’ expectations.
Oil prices slipped amid worries about how much fuel a slowing global economy will burn. Benchmark US crude fell 4.5% to $68.41 a barrel, just a few dollars above its lowest since late 2021.
Brent crude, the international standard, fell 4.8% to $71.73 a barrel. That sent energy stocks by far the biggest losses among the 11 sectors that make up the S&P 500. Devon Energy fell 2.6% and Diamondback Energy fell 3%.
However, reports on Wednesday offered some potentially encouraging data on the US economy. According to the Institute for Supply Management, growth in the US services industry accelerated slightly more than expected last month.
A separate report also suggested that the job market could be in better shape than expected. According to the ADP, hiring at private employers accelerated much faster than forecast last month. It could raise expectations for the federal government’s broader report on recruitment, which will arrive on Friday.
The job market has been one of the strongest pillars supporting the economy of late, although some mixed data recently suggested it could be weakening. On the one hand, the Fed sees this as helpful in bringing inflation closer to its 2% target. On the other hand, a decline would greatly increase the risk of a recession.
In the bond market, the yield on the 10-year Treasury fell to 3.38% from 3.44% late Tuesday. It helps set interest rates on mortgages and other major loans.
The two-year yield, which is moving closer to the Fed’s expectations, fell to 3.95% from 3.99%.
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` business writers Elaine Kurtenbach and Matt Ott contributed.
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