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Relief after Fed decision: Wall Street lights fireworks after interest rate jump

Relief after Fed decision
Wall Street lights up fireworks after interest rate hikes

The Fed chief expects a soft landing for the US economy. Although Powell has just announced a drastic rate hike, the relief on Wall Street is unleashing price fireworks. The first economists already warn against too much euphoria.

Wall Street initially found it extremely difficult to develop a mid-week trend. But then US Federal Reserve Chairman Jerome Powell set off a fireworks display for stock and bond prices as the dollar suffered. The Fed is not currently considering raising interest rates by 75 basis points, Powell said after the interest rate decision. But most market participants had been betting on just such a “big” rate hike in connection with the next Fed meeting.

The US Federal Reserve had previously tightened its monetary policy as expected and raised the benchmark interest rate by 50 basis points. In addition, the bulging balance sheet must be reduced – the bond holdings must be sold. Economists had predicted the rate hike by 50 basis points. With the prospect that the Fed will not push the current pace of future rate hikes, the blow Dow Jones Index by 2.8% to 34.061 points, S & P-500 And Nasdaq-Composite increased by 3.0 and 3.2 per cent respectively. A total of 2691 (Tuesday: 2027) price winners and 624 (1293) losers were counted on Wall Street, 123 (111) stocks were closed unchanged.

The Fed chairman also said he was confident that the US economy would have a “soft landing” and that a recession could be avoided. The day’s economic data, which played no role in pricing, already indicated a slowdown in the expansion of the US economy. “In the early 1990s we were able to go through a rate hike cycle and avoid an economic downturn. In all honesty, that was the only time in the last five rate hike cycles that we had a landing. soft, “Ameriprise Financial warned chief economist Russell Price not to get too excited about the rate hike. Failure to raise interest rates by more than 75 basis points.

The dollar is under pressure with Powell’s statements

US dollar / Euro
US dollar / Euro 94

The prospect of some bold rate hikes weighed on Dollar, the dollar index lost 0.8%. On the bond market, prices rose sharply with Powell’s statements, yields plummeted, especially for shorter maturities. The price of gold recovered significantly over the day, supported by lower market interest rates and a weak dollar.

To die oil prices however, it has increased dramatically. The EU wants to get serious about the Russian oil embargo, even though three states – Hungary, Slovakia and the Czech Republic – have raised objections. However, the EU wants to introduce an exception for these states so that the import ban applies to the other EU states. This reduced supply, which fueled prices. The fact that crude oil inventories in the US, contrary to expectations, have not declined according to US government data does not hold back the rise in oil prices. This is also due to the fact that gasoline stocks have decreased more significantly.

The reportage season sets the pace

Airbnb
Airbnb 146.40

The rally in the price of oil strengthened stocks in the corresponding sector (+ 4.1%), while semiconductor stocks (+ 4%) benefited from the decline in bond yields. In addition, the reporting season has determined the events. Advanced Micro Devices (AMD) increased by 9.2%. The chip maker posted record sales and also raised its annual outlook. However, the price was also supported by lower market interest rates.

Starbucks (+ 9.8%) recorded an increase in sales and profits in the second fiscal quarter. Airbnb (+ 7.7%) turnover more in the first three months of 2022 and contained the loss more than expected. The US biotechnology company Modern (+ 5.8%) had gained and implemented significantly more than expected in the last quarter. Moderna generated most of its revenue from sales of the Covid-19 vaccine.

Lyft it plummeted nearly 30 percent after the transportation provider had mostly exceeded expectations in the first quarter, but disappointed in profit and sales forecasts. Competitor Uber’s share price fell 4.6%. Uber more than doubled its revenue in the first quarter. The bottom line, however, was a loss of billions due to investments.

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