Stocks were mostly higher Wednesday in choppy trade, after the Federal Open Market Committee delivered the first 50 basis-point interest rate hike since 2000 and outlined plans to reduce its near $9 trillion balance sheet.
Oil prices were up on news that the EU has proposed a ban on Russian oil.
How are stocks trading?
The Dow Jones Industrial Average
rose 150 points, or 0.5%, to 33,268
The S&P 500
climbed 12 points, or 0.3%, to 4,188
The Nasdaq Composite shed 23 points, or 0.1%, at 12,547.
On Tuesday, the Dow industrials
rose 67.29 points, or 0.2%, to close at 33,128.79, the S&P 500
gained 0.5% to finish at 4,175.48. The Nasdaq Composite
added 0.2% to end at 12,563.76.
What’s driving markets?
The Federal Reserve pulled the trigger on a half percentage point interest rate hike, as expected, and announced the start of “quantitative tightening,” or reducing its near $9 trillion balance sheet.
The move was the biggest from the U.S. central bank since 2000 when President Bill Clinton occupied the White House, and comes as Fed Chairman Jerome Powel works to cool hot inflation without setting off an economic recession.
The central bank also outlined a process to slash its balance sheet, first by $47.5 billion a month starting in June, but ramping up to $95 billion a month.
Investors will next tune into a news conference with Powell at 2:30 p.m. Eastern Time. Clarity from the Fed on size and scope of future rate increases could give beleaguered stocks a lift, say some analysts.
“The question will be, what factors will be in play that officials look at in terms of how long to continue with 50 basis point hikes,” said Russell Price, chief economist at Ameriprise Financial, by phone.
“In the early 1990s, we were able to go through a rate-hiking cycle and avoid an economic downturn,” he said. “Quite frankly, it’s the only time we’ve achieved a soft landing in the last five interest rate hiking cycles.”
Bryce Doty, senior portfolio manager at Sit Fixed Income, expected Powell to kick off an aggressive path to tighter financial conditions, but warned “there is more pain to come as yields continue to move higher,” even with “the carnage incurred by bond investors so far this year.”
“While the worst may be over in terms of bond market losses with the Bloomberg Aggregate Bond Index down 9.5% in the first four months of the year, inflation is still a problem,” Doty said in emailed comments Wednesday.
There also was a slew of U.S. economic data, with private payrolls climbing by 247,000 in April, according to the ADP National Employment Report released Wednesday. Economists polled by The Wall Street Journal had forecast a gain of 390,000 private sector jobs.
“In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist at ADP.
The U.S. trade deficit also jumped 22.3% to record $109.8 billion in March, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis said Wednesday. U.S. imports climbed 10.3% to $351.5 billion, while U.S. exports increased 5.6% to $241.7 billion in March.
In addition, the Institute for Supply Management purchasing managers index for services sector showed weaker new-orders growth and employment, with the number dropping to 57.1% in April from 58.3%, below forecast.
Oil was also in focus, with prices for both Brent
and West Texas Intermediate crude
up almost 4% each after the European Union proposed banning Russian oil imports under a phased six-month plan, and refined products within a year.
The move would be part of a sixth batch of EU sanctions against Russia over its invasion in Ukraine that began in late February.
Which companies are in focus?
stock tumbled 32% after the ride-hailing group reported a better-than-expected first quarter, but profit and sales guidance disappointed. Shares of rival Uber Technologies Inc.
fell around 7.4%, after the company reported a $5.93 billion net loss in the first quarter derived from its investments in other three companies.
Chinese ride-hailing company Didi Global Inc.
American depository receipts fell 2%, after the company said it was under investigation by the Securities and Exchange Commission regarding its 2021 IPO.
shares climbed 1.6% after the lodging-booking company reported forecast-beating results and said it surpassed 100 million nights booked in a quarter for the first time.
stock rose 7.6% after the coffee giant reported in-line earnings, amid rising costs and inflation and thinner margins. Chief Executive Howard Schultz said “record” demand was helping accelerate store-growth plans.
How did other assets fare?
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was down 0.1%.
was up 4.2% at $39,215.
In Asia, the Hang Seng Index
fell 1.1% in Hong Kong, while many other Asian markets remained closed for a holiday.
––Barbara Kollmeyer contributed reporting