[New York Stock Market] "US Economy Strong" Rally After Fed Rate Hike... Nasdaq Up 3.77%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The three major indices of the U.S. New York stock market all closed higher on the 16th (local time) after the central bank, the Federal Reserve (Fed), raised the benchmark interest rate for the first time in 3 years and 3 months and signaled six more hikes within the year. The market, judging that the Fed's tightening measures to curb inflation were based on confidence in the U.S. economy, showed a rally ahead of the market close.

On this day at the New York Stock Exchange (NYSE), the Nasdaq index, which is tech-stock focused, closed at 13,436.55, up 487.93 points (3.77%) from the previous session. The S&P 500 index, centered on large-cap stocks, rose 95.41 points (2.24%) to 4,357.86, and the blue-chip Dow Jones Industrial Average climbed 518.76 points (1.55%) to close at 34,063.10.

Investors closely watched the Fed's move to raise the benchmark interest rate by 0.25 percentage points for the first time since December 2018. The Dow index, which initially declined immediately after the rate hike announcement, turned upward during the press conference held by Fed Chair Jerome Powell.

On this day, the Fed indicated through its dot plot that it expects the interest rate to reach 1.9% by the end of this year, suggesting rate hikes at each of the remaining six meetings this year. It also confirmed that the balance sheet reduction could begin as early as the May FOMC meeting. Chair Powell repeatedly expressed concerns about inflation during the press conference but emphasized the strength of the U.S. economic fundamentals and that the possibility of a recession had not significantly increased.

Mike Loewengart, Head of Investment Strategy at E*TRADE, said, "Don't forget that monetary tightening means the Fed believes the economic fundamentals are solid. That is ultimately a good thing," adding, "The market is smoothly digesting today's news."

Powell's tightening remarks remained within the initially expected range, so there was no surprise shock to the market. Charlie Ripley, Senior Market Strategist at Allianz Investment, said, "With inflation persistently high, the Fed must take aggressive measures such as rate hikes and balance sheet reduction," adding, "Now the market needs to get more accustomed to the hawkish stance."

By sector, bank stocks, expected to benefit from the rate hike through improved profitability, showed strength. JPMorgan rose more than 3% from the previous session. Bank of America (BoA) also increased by 2.5%. Micron Technology rose more than 4%. Starbucks jumped over 3% after JPMorgan upgraded its investment rating.

In the bond market, the yield on the U.S. 10-year Treasury note reached 2.185%, marking the highest level since 2019.

Investors also paid attention to peace negotiations between Russia and Ukraine. Expectations for a ceasefire spread following reports that the negotiation teams from both sides were preparing a peace plan consisting of 15 articles, improving investor sentiment. Russian Foreign Minister Sergey Lavrov gave a positive signal, saying, "There is hope for reaching a compromise."

The somewhat stable oil prices also contributed to the stock market rebound. Oil prices fell due to ceasefire hopes between Russia and Ukraine and surprising increases in U.S. crude oil inventories. On the New York Mercantile Exchange, the April West Texas Intermediate (WTI) crude oil price closed at $95.04 per barrel, down $1.40 (1.5%) from the previous session. WTI prices have fallen for three consecutive trading days.

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