US close: Stocks finish firmer as Fed hikes rates

Wall Street stocks closed firmer on Wednesday, after the Federal Reserve sated market expectations by raising interest rates.

At the close, the Dow Jones Industrial Average was up 1.55% at 34,063.10, while the S&P 500 added 2.24% to 4,357.86 and the Nasdaq Composite rose 3.77% to 13,436.55.

The Dow closed 518.76 points higher on Wednesday, extending gains recorded on Tuesday even amid ongoing concern over Russia’s invasion of Ukraine, and a spike in Covid-19 cases in China.

“If there was ever any doubt, the Federal Reserve has today confirmed that the era of ‘transitory’ inflation is over,” said Giles Coghlan, chief analyst at HYCM.

“As many analysts had predicted, policymakers have opted to begin a long-anticipated cycle to hike rates, despite the many uncertainties that persist in the global economy.

“Last week’s consumer price index came in at 7.9% for the year through February - something that has no doubt been exacerbated by Russia’s invasion of Ukraine, which has triggered supply issues and a fresh surge in commodities.”

Coghlan asked if the Fed was being hawkish enough, however, adding that it had “a lot on its plate” in balancing the inflation narrative, alongside the risk of sending the US economy into a recession.

“Going forward, any further hiking action will come with caveats - we may see a more dovish approach to tightening, rather than the aggressive approach we have been primed for over the past year.

“But today, we traders and investors could see a ‘buy the rumour, sell the fact’ response to the announcement, which would favour upside in stocks, gains for gold and silver, as well as euro-dollar upside and a drop in US 10-year yields.”

The Federal Open Market Committee raised its benchmark lending rate target by 25 basis points after its two-day policy meeting, making for the first rate hike in four years.

It marked a significant shift away from two years of accommodative policy, amid inflation running at 40-year highs and many economies facing a cost-of-living crisis.

Looking ahead, the Fed now saw its main policy rate reaching 1.9% by the end of 2022, and increasing to 2.8% next year, with the bank’s number-crunching suggesting that was the level where interest would begin putting the kibosh on economic growth.

The Federal Reserve also said it now saw inflation averaging 4.3% by year-end, up from its previous forecast for a peak of 2.6%.

“We will take the necessary steps to ensure that high inflation does not become entrenched,” said Fed chair Jerome Powell after the meeting.

“We have the tools that we need and we are going to use them - we have a plan over the course of this year to raise interest rates steadily and also to run off the balance sheet.”

Powell said he expected inflation would remain high through the middle of the year, begin to come down towards the end of 2022, and then fall more sharply next year.

“Before the invasion of Ukraine by Russia, I would have said that the expectation was that inflation would peak sometime in the first quarter,” he added.

“Now we are already seeing a little bit of short-term upward pressure on inflation due to higher oil prices.

“We’ve had price stability for a long time and maybe come to have taken it for granted - now we see the pain; I am old enough to remember what high inflation is like.”

Earlier in the session, sentiment was boosted by a report suggesting Russia and Ukraine had drawn up a neutrality plan to end the war, including a possible ceasefire and the withdrawal of Russian troops.

Under the terms of the 15-point plan, Kyiv would renounce joining the North Atlantic Treaty Organisation (NATO) in exchange for security guarantees, the Financial Times said.

Those guarantees would be provided by the likes of the United States, the UK and Turkey, while Kyiv would also pledge not to host foreign military bases or weaponry.

Russia was also looking like it was defaulting on its debts for the first time since the 1990s, as economic and financial sanctions began to bite.

Interest payments of $117.0m on two dollar-denominated sovereign bonds sold in 2013 were due on Wednesday - the first coupon payments to fall due since Russia invaded Ukraine, and the US, UK and European Union imposed economic and financial sanctions on Moscow in response.

On the macro front, mortgage applications fell 1.2% in the week ended 11 March, according to the Mortgage Bankers Association of America, following an 8.5% jump a week earlier.

Applications to refinance a home loan declined 2.8%, while those to purchase a home edged up 0.7% as the average fixed 30-year mortgage rate increased to 4.27% - the highest rate seen since May 2019.

Elsewhere, US retail sales came in far above economists' forecasts thanks to upwards revisions to data for January.

According to the Department of Commerce, retail sales volumes grew at a month-on-month pace of 0.3% in February to reach $658.13bn.

The rate of the monthly increase was one-tenth of a percentage point less than what economists had pencilled-in.

Imported goods increased in cost a touch more slowly than anticipated last month, meanwhile, with the Department of Labor reporting import prices rose at a seasonally-adjusted month-on-month pace of 1.4% in February, just shy of consensus forecasts for a 1.6% rise.

Still on data, the National Association of Home Builders' housing market index fell to a six-month low of 79 in March, down from 81 in February and below market forecasts for a flat month-on-month reading.

Home sales over the next six months sub-index sank to 70 from 80 and the current single-family sub-index dropped to 86 from 89, while the gauge for prospective buyers increased to 67 from 65.

In equities, US listings of Chinese stocks were in focus after fresh regulatory concerns saw them sold off in recent days.

State media reports from Beijing earlier on Wednesday suggested authorities in China were keen to support companies with overseas listings, and hinted at a cooperation deal with Washington lawmakers on the matter.

Alibaba Group jumped 36.76% in New York, while JD.com surged 39.36% and Pinduoduo rocketed 56.06%.

Caffeine pusher Starbucks added 5.16% after the company announced founder Howard Schultz would return as interim chief executive, following the resignation of Kevin Johnson.

On the downside, cybersecurity software giant NortonLifeLock tumbled 13.3% after the UK Competition and Markets Authority raised concerns about its proposed acquisition of its London-listed Czech competitor Avast.

Dow Jones - Risers

Boeing Co. (BA) $188.99 5.06%
Nike Inc. (NKE) $125.19 4.85%
Salesforce.Com Inc. (CRM) $205.57 4.81%
JP Morgan Chase & Co. (JPM) $138.40 4.47%
Intel Corp. (INTC) $46.63 4.06%
Goldman Sachs Group Inc. (GS) $340.76 3.52%
Walt Disney Co. (DIS) $138.14 2.94%
Apple Inc. (AAPL) $159.59 2.90%
Visa Inc. (V) $211.87 2.78%
American Express Co. (AXP) $180.61 2.60%

Dow Jones - Fallers

Walgreens Boots Alliance, Inc. (WBA) $47.38 -1.64%
Johnson & Johnson (JNJ) $174.52 -0.92%
Merck & Co. Inc. (MRK) $78.00 -0.66%
Verizon Communications Inc. (VZ) $52.49 -0.51%
Travelers Company Inc. (TRV) $179.29 -0.50%
Chevron Corp. (CVX) $157.71 -0.36%
Procter & Gamble Co. (PG) $149.68 -0.34%
Walmart Inc. (WMT) $145.35 -0.29%
Coca-Cola Co. (KO) $59.44 -0.27%
Caterpillar Inc. (CAT) $216.08 -0.18%

S&P 500 - Risers

Kohls Corp. (KSS) $63.11 17.26%
J.B. Hunt Transport Services Inc. (JBHT) $218.06 9.59%
Micron Technology Inc. (MU) $79.67 8.97%
Affiliated Mgrs Group (AMG) $141.34 8.51%
Wynn Resorts Ltd. (WYNN) $75.17 8.13%
Macy's Inc. (M) $26.79 7.76%
United Airlines Holdings Inc (UAL) $41.19 7.71%
Align Technology Inc. (ALGN) $420.65 7.66%
PVH Corp. (PVH) $80.53 7.54%
Paypal Holdings Inc (PYPL) $107.92 7.43%

S&P 500 - Fallers

NortonLifeLock Inc. (NLOK) $26.11 -13.28%
CF Industries Holdings Inc. (CF) $88.16 -7.06%
Lockheed Martin Corp. (LMT) $421.57 -6.09%
L3Harris Technologies Inc. (LHX) $243.08 -5.69%
Northrop Grumman Corp. (NOC) $424.43 -5.22%
Gen Dynamics Corp. (GD) $227.69 -4.18%
Schlumberger Ltd. (SLB) $37.88 -3.52%
National Oilwell Varco Inc. (NOV) $18.75 -2.95%
Occidental Petroleum Corp. (OXY) $52.99 -2.82%
HF Sinclair Corporation (DINO) $35.39 -2.75%

Nasdaq 100 - Risers

JD.com, Inc. (JD) $64.08 39.36%
Baidu Inc. (BIDU) $150.87 39.20%
Trip.com Group Limited (TCOM) $23.34 28.38%
NetEase Inc. Ads (NTES) $93.31 25.69%
Mercadolibre Inc. (MELI) $1,075.97 12.98%
J.B. Hunt Transport Services Inc. (JBHT) $218.06 9.59%
Asml Holdings N.V. (ASML) $650.63 9.04%
Micron Technology Inc. (MU) $79.67 8.97%
Wynn Resorts Ltd. (WYNN) $75.17 8.13%
Align Technology Inc. (ALGN) $420.65 7.66%

Nasdaq 100 - Fallers

NortonLifeLock Inc. (NLOK) $26.11 -13.28%
Walgreens Boots Alliance, Inc. (WBA) $47.38 -1.64%
Gilead Sciences Inc. (GILD) $57.97 -0.60%
Activision Blizzard Inc. (ATVI) $79.12 -0.49%
Sirius XM Holdings Inc (SIRI) $6.21 -0.48%
Kraft Heinz Co. (KHC) $37.68 -0.37%
Henry Schein Inc. (HSIC) $86.27 -0.05%
Cerner Corp. (CERN) $93.57 -0.03%
Maxim Integrated Products Inc. (MXIM) $103.14 0.00%
Mylan Inc. (MYL) $0.00 0.00%