Stocks rally after Fed signals rate hikes nearing end


Stocks were higher early Thursday afternoon after the Federal Reserve on Wednesday signaled its rate hiking campaign may be nearing an end amid concerns about stability in the global banking system.

Near 12:10 p.m. ET on Thursday, the S&P 500 (^GSPC) was up 1.5%, the Dow Jones Industrial Average (^DJI) higher by 1.2%, and the technology-heavy Nasdaq Composite (^IXIC) led the way, rising as much as 2.1%.

Other major assets on the move on Thursday included WTI crude oil, which was higher by 0.2% to trade just above $71 a barrel. Crude oil slumped to its lowest level in nearly two years earlier this week amid worries over global demand and a rally in the dollar.

The 10-year Treasury yield also came in a bit Thursday, falling three basis point to trade near 3.47% after yields moved lower on Wednesday following the Fed’s latest economic forecasts suggested rate hikes are closer to ending than previously expected.

On Wednesday, the Fed raised the target range for its benchmark interest rate by 0.25% as expected, bringing the range for the fed funds rate to 4.75%-5%, the highest since October 2007.

Updated economic projections from the Fed, however, suggested only one more 0.25% rate hike is likely this year, a forecast that is in-line with what the central bank said in December but a reversal from Fed Chair Jay Powell’s signaling earlier this month that rates would likely need to go “higher than previously anticipated.”

U.S. Federal Reserve Board Chair Jerome Powell arrives for a news conference after the Fed raised interest rates by a quarter of a percentage point following a two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., March 22, 2023. REUTERS/Leah Millis

“The outcome of the March Federal Open Market Committee (FOMC) meeting was broadly as we expected,” wrote Bank of America economists led by Michael Gapen. “That said, the Fed has taken on board some amount of tightening in credit standards and terms as a result of the recent stresses that emerged from several regional banks.”

Speaking in a press conference following Wednesday’s policy announcement, Powell said some of these tighter financial conditions would have the “same effect” as raising interest rates. As a result, Powell said several Fed officials were including the bank crisis and financial market fallout in their forecast for fewer rate hikes over the balance of this year.

“Powell stuck with the Fed’s narrative that there is still a path toward a soft-landing or returning inflation to target without pushing the economy into a recession,” wrote Ryan Sweet, Chief U.S. economist at Oxford Economics, in a note on Wednesday. “However, that path has become narrower because of the pressure on the banking system.”

Away from the index-level reaction to Wednesday’s Fed news, several big tickers related to the crypto industry were on the move after news since Wednesday’s close.

Coinbase (COIN) stock was down 10% on Thursday after the company disclosed late Wednesday it received a Wells Notice from the SEC, which warns companies of pending action from the regulator. Shares of Coinbase had fallen as much as 18% earlier in the session.

Shares of Block (SQ), the payments company formerly known as Square, were also under pressure Thursday, falling as much as 18% after short-seller Hindenburg Research released a new report on the company which alleged up to 75% of the company’s accounts were in some form fraudulent or second accounts from existing users.

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