US stocks experienced a surge on Wednesday after the Federal Reserve voted to keep interest rates steady at the highest range in 22 years. The S&P 500 and Dow Jones Industrial Average both saw gains, while the tech-heavy Nasdaq soared. The decision by the central bank to hold rates steady comes as they wait to see how their aggressive credit tightening campaign affects the US economy. Treasury yields also saw a slight decrease following the announcement. Investors have adjusted their expectations for future rate hikes, with a higher likelihood that rates will remain steady through January.
During the policy meeting, Fed Chair Jerome Powell addressed questions about the central bank’s previous projection for another rate hike this year, emphasizing that the Summary of Economic Projections is not a guarantee for the future. The Fed’s “dot plot” projections, which map out expectations for future interest rates, showed one more rate hike for 2023, causing concern in the market. However, Powell stated that the dot plot is subject to change based on various factors, and should not be seen as a fixed plan.
Despite economists warning of a potential recession, Powell affirmed that the Federal Reserve does not foresee a recession in the near term. He pointed to recent strong economic data, including robust GDP growth and low unemployment rates, as indicators of a strong US economy.
In its updated assessment, the Federal Reserve upgraded the economy to “strong” in the third quarter, compared to its previous characterization of “solid.” The central bank noted that while job gains have moderated, they remain strong, and inflation remains elevated.
Overall, the Federal Reserve’s decision to hold rates steady was unanimous. The central bank will continue to monitor incoming information and adjust monetary policy as needed to achieve its goals.
In the lead up to the Fed announcement, stocks were trading higher, with the S&P 500, Dow Jones, and Nasdaq all seeing gains. Yields on 10-year Treasury bonds also trended lower.
Regarding trending tickers, AMD saw a significant rise in stock price after reporting better-than-expected quarterly results. On the other hand, Paycom and Estée Lauder stocks faced declines after both companies provided lower sales guidance. WeWork stock also tumbled following reports of a potential bankruptcy filing.
The US Treasury’s quarterly refunding announcement, which revealed that $112 billion in debt will be auctioned next week, had a positive impact on the market. Investors had feared that higher-than-expected bond issuance would lead to increased bond yields, but the announcement eased concerns, causing yields to decrease.
In conclusion, the Federal Reserve’s decision to hold interest rates steady and the positive market response reflect confidence in the US economy. Despite concerns of a recession, the central bank remains optimistic about the current economic activity.
