Nasdaq and Bitcoin Turn Bullish... "Market Relieved by Fed's Three Rate Hike Forecast"

[Asia Economy New York=Correspondent Baek Jong-min] Wall Street positively evaluated the Federal Reserve's (Fed) plan for three interest rate hikes next year. As the Fed did not signal more aggressive rate increases, the market turned upward amid perceptions of bad news being resolved.

The New York Stock Exchange electronic board is broadcasting the press conference of Jerome Powell, Chairman of the Fed. After Chairman Powell's remarks, major indices of the New York stock market moved away from declines and expanded their upward trend. [Image source=Reuters Yonhap News]

On the 15th (local time), immediately after Fed Chair Jerome Powell's press conference, the Nasdaq index, sensitive to interest rates, surged nearly 2% intraday. The Dow Jones and S&P 500 indices also rose by 1% and 1.5%, respectively.

The 10-year Treasury yield remained at 1.462%, up 0.02 percentage points. The 2-year yield, sensitive to policy rates, rose 0.026 percentage points to 0.6853%, but the impact on long-term bonds was relatively limited.

Risk assets heavily affected by rate hikes, such as cryptocurrencies, also rebounded. Bitcoin rose 3.8% that day, approaching the $49,300 level.

The market reaction mainly reflects the view that the Fed and Chair Powell have eased market concerns.

Tom Garretson, bond investment strategist at RBC Asset Management, explained, "Although three rate hikes in 2022 are slightly more hawkish than expected, the market is tolerating this."

Garretson also noted that the market was relieved that only two members in the dot plot forecast four rate hikes next year.

Mark Cabana, head of short-term interest rate strategy at Bank of America, who predicted two rate hikes next year, said, "The Fed has turned hawkish, but the market expects that this hawkish stance will help control inflation."

Chris Rupkey, chief economist at FWD Bonds, said, "The Fed accelerated tapering within three months. By taking the stance that inflation is not transitory, they have turned on the firehose."

Mike Rosengart, investment strategy director at E*TRADE Financial, said, "Even after three rate hikes next year, we will still remain in historically low interest rate territory. The Fed’s clear guidance has positively influenced the market."

This content was produced with the assistance of AI translation services.