Stocks rise after Fed hikes rates

US stocks rallied after the Federal Reserve raised interest rates by a quarter of a percentage point Wednesday. The move was widely expected, and the Fed signaled that "ongoing increases" to short-term rates "will be appropriate."

But Wall Street seemed to take solace from the fact that inflation pressures are easing, which should allow the Fed to raise rates far more gradually than it did last year.  

Investors are also waiting for earnings after the closing bell from Facebook and Instagram owner Meta Platforms. The stock was up nearly 3% Wednesday and has rallied more than 25% so far this year.

The Dow was up nearly 10 points, essentially unchanged.

The S&P 500 rose 1.1%.

The Nasdaq Composite gained 2%.

As stocks settle after the trading day, levels might still change slightly.

Don't fight the Fed? More like don't fight the Wall Street bulls.

The Federal Reserve raised rates. Again. Fed chair Jerome Powell continued to stress that the Fed has more to do to get inflation in check. Nothing new there. Add that up and it seems clear that more rate hikes are on the way. No Fed pause just yet. And forget about rate cuts by the end of the year.

But investors mostly cheered the latest moves from the Fed. The Dow was flat but the other two major market indexes were near their highest levels of the day in the last hour of trading, rebounding from losses earlier in the trading session. It looks like this is a market that just wants to keep climbing. Investor sentiment has improved dramatically in recent weeks. Stocks enjoyed a strong rally in January as a result.

The Dow was up about 35 points, or 0.1%.

The S&P 500 rose 1%.

The Nasdaq Composite gained 1.9%.

Fed Chair Jerome Powell got Covid two weeks ago. So it seems like odd timing for the Fed to cut any reference to the pandemic from its policy statement for the first time in nearly three years.

The Fed believes Covid is no longer a predominant factor weighing on the US economy. (Similarly, President Joe Biden intends to end the Covid-19 national and public health emergencies on May 11, the White House said Monday.)

"I personally understand well that Covid is still out there, but that it is no longer playing an important role in our economy," Powell said. "We kept that statement in there for quite a while, and I think we knew we would take it out at some point. There is never a perfect time, but we thought that -- you know, people are handling it better, and the economy and society are handling it better. It doesn't really need to be in the Fed's post-meeting statement as an ongoing economic risk, as opposed to a health issue."

Inflation and employment are typically on opposite ends of a scale, and the Fed's job is to balance them. But it's not always correct to say lower inflation means higher unemployment.

At a press conference, Fed Chair Jerome Powell noted that lower inflation means consumers will start to spend more. Although he does expect America's economic growth to slow this year, he thinks lower unemployment could actually help buoy GDP in the long run.

"As inflation does come down, sentiment will improve," Powell said. "There is a lot of spending coming in the construction pipeline both private and public. That will support economic activity. So I think there is a good chance that those factors will help support positive growth this year."

Is the Federal Reserve considering a pause on rate hikes after reducing the pace from three-quarters of a point to a half point to a quarter point in consecutive meetings? Probably not, Fed Chair Jerome Powell says.

"This is not something that the committee is thinking about or exploring in any kind of detail," Powell said Wednesday. "In principle, though ... I think a lot of options are available."

Powell noted that the perspective on the relative pace of rate hikes changes over time, pointing out how the Fed used to raise rates by a quarter point every other meeting, "and that was considered a fast pace."

But hitting pause isn't on the Fed's mind right at the moment.

"This is not something that the Federal Open Market Committee is on the point of deciding right now," Powell said.

Federal Reserve Chair Jerome Powell didn't mince words about the debt ceiling: Raise it now.

"I feel like I have to say this," Powell said in Wednesday's post-meeting press conference. "There is only one way forward here, and that is for Congress to raise the debt ceiling so the United States government can pay all of its obligations when due. Any deviations from that path would be highly risky and no one should assume the Fed can protect the economy from the consequences of failing to act in a timey manner."

Failure to raise the debt ceiling could mean the United States will default on its debt obligations. A default could be catastrophic, causing “irreparable harm to the US economy, the livelihoods of all Americans and global financial stability,” Treasury Secretary Janet Yellen has warned.

Federal Reserve Chair Jerome Powell said the Fed will probably continue to hike rates for the foreseeable future to combat stubbornly high inflation.

Although inflation has come down significantly over the past several months, it's still more than double the Fed's target annual rate of 2%.

"I think it would be very premature to declare victory or think we really got this," Powell said at a press conference. "The job is not fully done."

Powell noted that the Fed continues to err on the side of caution on inflation. That means the central bank would rather hurt the economy too much to bring inflation down than take its foot off the rate-hike gas too soon and cause inflation to rise again.

"I continue to think that it is very difficult to manage the risk of doing too little, and finding out in six or 12 months that we actually were close but didn't get the job done," Powell said. "We have no incentive or desire to over-tighten, but if we feel we have gone too far ... we have tools that would work on that."

The market can't seem to figure out how to interpret the latest Federal Reserve rate hike.

Stocks initially bounced off their lows. Then the Dow reversed gears and plunged more than 450 points. By about 2:45 ET (15 minutes into the Fed press conference and 45 minutes after the Fed statement was released) the Dow was well off its lows again and the S&P 500 and Nasdaq were solidly higher.

Fed chair Jerome Powell said in the press conference that the Fed is committed to sticking with its current policy of fighting inflation until the job is done. And the Fed noted in its statement that it "anticipates that ongoing increases in the target range will be appropriate."

Ongoing increases. Plural. That doesn't imply that a pause in rate hikes is coming anytime soon.

Still, investors seemed to take comfort from the fact that the Fed is no longer raising rates by the historically large levels of last year.

The Dow was down about 5 points, essentially flat.

The S&P 500 rose 0.8%.

The Nasdaq Composite gained 1.5%.

No one is upset that America's labor market remains strong -- not even Federal Reserve Chair Jerome Powell.

The common belief on Wall Street was that Powell wanted to see layoffs and a higher unemployment rate, because that would serve as evidence that the Fed is cooling off the red-hot economy to keep inflation under control.

But that's not what Powell said Wednesday.

"I will say it is gratifying to see the disinflationary process now getting under way, and we continue to get strong labor market data," he said.

Powell noted that Wednesday's job openings report came in higher than expected, and though wage growth is easing up, "By many, many indicators, the job market is still very strong."