Stock futures inch higher after Fed hikes interest rates the most since 1994

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US stock index futures were modestly higher in overnight trading Wednesday after the Federal Reserve implemented its largest rate hike since 1994.

Futures contracts linked to the Dow Jones Industrial Average added 0.22%. S&P 500 futures were up 0.23%, while Nasdaq 100 futures were up 0.29%.

Major averages ended Wednesday’s session higher with the Dow and S&P 500 both breaking five-day losing streaks. The 30-stock benchmark added about 304 points, or 1%, while the S&P 500 rose 1.46%. The tech-heavy Nasdaq Composite was the relative outperformer, up 2.5%.

The Federal Reserve announced a 75 basis point rate hike on Wednesday, which the market had widely anticipated.

“Clearly, today’s 75 basis point increase is an unusually large one, and I don’t expect moves of this magnitude to be common,” Federal Reserve Chairman Jerome Powell said at a news conference after the decision.

Shares took it a step further after Powell said a 50 or 75 basis point increase looks “most likely” at its next meeting in July, signaling the central bank’s commitment to fight inflation. Powell warned, however, that decisions will be made “meeting by meeting.”

Individual member forecasts show that the Fed benchmark rate is now on track to end the year at 3.4%.

“Right now, the market has done a lot of the Fed’s work for them in terms of stocks and bonds sold over the past week — not to mention the entire year — so it’s not surprising that both markets are today higher (stocks and bonds) higher prices; bond yields lower) given that they sold so much in today’s meeting,” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance.

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Despite Wednesday’s rebound, key averages are still lower for the past week and month and remain sharply below their all-time highs.

The S&P 500 and Nasdaq Composite are both in bear market territory, about 21% and 32% respectively below their all-time highs in January and November. The Dow, meanwhile, is 17% below its intraday high on January 5.

Rampant inflation, which is at its highest level in 40 years, has weighed on key averages, as have fears of slowing economic growth and the possibility of a recession.

“The market was very prepared, even late in the story,” said Michael Wilson, Morgan Stanley’s chief strategist for US equities, after announcing a 75 basis point hike. “There is relief here,” he noted, before adding that the hike won’t solve the inflation problem overnight.

“It also increases the risk of a recession because you push interest rate hikes forward even faster, and I don’t think it’s going to help the bond market,” he said on CNBC’s “Closing Bell Overtime.”

Economic data released Thursday includes weekly numbers of jobless claims, with economists polled by Dow Jones predicting a 220,000 print run. Housing launches will also be released, while Adobe and Kroger will report quarterly updates.



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