After the Fed’s interest rate hike, Wall Street was divided

After the Fed's interest rate hike, Wall Street was divided

The Federal Reserve on Wednesday raised its benchmark overnight interest rate by half a percentage point and said it would begin trimming its bond holdings next month as a further step in the battle to lower inflation. The U.S. central bank set its target federal funds rate to a range between 0.75% and 1% in a unanimous decision, with further rises in borrowing costs of perhaps similar magnitude likely to follow.

After the Federal Reserve announced its widely anticipated interest-rate hike, the largest since 2000, Wall Street markets were mostly flat on Wednesday. Stocks rose at first, then fell. The Dow and S&P 500 both rose little, while the Nasdaq fell marginally. Trading was choppy ahead of Fed Chair Jerome Powell’s 2:30 p.m. ET press conference. Investors are waiting for new information on how far and how fast the central bank is willing to go to reduce decades-high inflation.

Concerns about a hit to economic growth due to a hawkish Fed, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, with richly valued growth stocks bearing the brunt of the sell-off. At 2:26 p.m. ET, the Dow Jones Industrial Average rose 124.57 points, or 0.38%, to 33,253.36, the S&P 500 gained 8.29 points, or 0.20%, to 4,183.77 and the Nasdaq Composite dropped 37.20 points, or 0.3%, to 12,526.56.

Lyft Inc shares plummeted by 33.3% amid concerns about the company’s ridership and spending. The ride hailing company reported first-quarter revenue of $875 million, a 44% increase over the previous year, while the number of active riders missed analyst expectations. Nine of the 11 major S&P sectors rose, with energy and utilities leading the gains.

Bank stocks were up 0.7% after U.S. Treasury two-year yields, the most sensitive to the Federal Reserve’s interest rate outlook, soared to their highest since Nov 2018. The benchmark 10-year yield topped 3% for a third consecutive day. Declining issues outnumbered advancing ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 1.72-to-1 ratio favored decliners. The S&P 500 posted two new 52-week highs and 37 new lows; the Nasdaq Composite recorded 24 new highs and 341 new lows.

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