Dow jumps 1.4% as US stocks cheer latest Fed rate increase

NEW YORK: Wall Street stocks rallied yesterday (July 27) as the Federal Reserve (Fed) again proceeded with a large interest rate increase, maintaining its forceful stance to combat inflation.

The Dow Jones Industrial Average finished up 1.4% at 32,197.59. The broad-based S&P 500 gained 2.6% to 4,023.61, while the tech-rich Nasdaq Composite Index jumped 4.1% to 12,032.42.

The US central bank carried out the second straight 75 basis point increase, and the fourth rate increase this year, moving aggressively to cool the strongest surge in inflation in more than four decades without derailing the world’s largest economy.

In a vote that was unanimous, the policy-setting Federal Open Market Committee raised the benchmark lending rate to a range of 2.25% to 2.50%, after starting the year with the rate near zero.

Fed chair Jerome Powell said that while there are signs of slowing, he did not believe the US economy was currently in recession, in part because of the strong job market.

Analysts said the central bank’s move met market expectations and took heart in Powell’s statements that implied the central bank could undertake smaller interest rate hikes later in 2022 after two straight super-sized increases.

Wall Street “is contemplating less aggressive monetary policy at least on the Fed Funds rate as we move from the third quarter into the fourth quarter”, said Art Hogan, chief market strategist at B Riley Wealth Management.

Stocks had been in positive territory prior to the Fed’s announcement, but added to gains during Powell’s news conference before the close.

All 11 sectors of the S&P 500 finished higher, along with most of the 30 members of the Dow index.

Very large gains were enjoyed by both Microsoft, up 6.7%, and Google parent Alphabet, up 7.7%, despite reporting lower profits that were still not as bad than feared. – AFP

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