Dow and Nasdaq surge after Fed delivers rate-hiking timeline
On Wednesday, U.S. stocks moved higher as the market passed through one of the most considerable uncertainties. As the market expected, the Federal Reserve indicated a more aggressive slowdown of its monthly bond-buying. It also forecasted multiple rate hikes for the following year.
The S&P 500 increased 1.64% to 4,709.86, while the Nasdaq Composite rose 2.16% to 15,565.59. The Dow Jones Industrial Average added 383.27 points, equal to 1.09%, to close at 35,927.45. All of them were in negative territory before the central bank made a decision.
On Wednesday, the Fed announced that it would end its tapering (asset purchases) faster in the middle of continued increasing inflation. The Fed plans to buy around $60 billion per month of bonds in January. It said that it would probably continue that approach in the following months.
The decision comes as the central bank struggles with the highest inflation level in the last forty years. The Fed will accelerate its taper in December.
This decision results in a dramatic policy shift that will allow a first interest rate hike in 2022. On Wednesday, the central bank indicated that its members saw three hikes in the following year.
A chief strategist from Morgan Stanley Investment Management, Jim Caron, said that it is clear how fast it will happen. He added that now they need to focus on earnings and growth from an equity perspective.
The shares of Apple increased nearly 3.1%, continuing the stock’s recent momentum while raising the market averages. Microsoft and Netflix also rose. Nasdaq’s underperformance at the beginning of this week changed after Wednesday’s moves.
Health-care stocks, including Amgen and UnitedHealth, started rising 3.2% and 2.7%.
However, big banks declined after the Fed indicated that multiple rate hikes were possible in the future. Shares of the Bank of America and JPMorgan fell.
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