Fed unveils 75-basis-point rate hike, Powell doesn't see US in recession
US stocks rallied on Wednesday led by Nasdaq after the Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point and comments by Federal Reserve Chairman Jerome Powell reassured investors.
Powell said in a news conference following the Fed announcement that he did not believe the U.S. economy is currently in a recession but that it is softening and the path for the Fed to avoid a recession continues to narrow.
"I don't think the economy is in recession right now," Powell said following the central bank's latest two-day policy meeting. But officials do believe the economy needs a period of below-potential growth to create sufficient slack to lower inflation.
He also said the lack of clear visibility into the future of the economy means the U.S. central bank can provide reliable guidance about where its policy is headed only on a "meeting-by-meeting" basis.
The Fed action comes on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.
Wednesday's hike was widely anticipated by investors.
“Basically, what the market did not want to see was the Fed tightening and raising by 100 basis points. So, we saw 75 basis-points. And kind of is in lockstep with what the market wants to see. And I think the market got a little bit of a relief there from the Fed today." said George Cipolloni, portfolio manager at Penn Mutual Asset Management.
The news added to gains from upbeat quarterly reports from Microsoft Corp and Alphabet Inc that lifted sentiment about the earnings season
The S&P 500 gained 102.56 points, or 2.62%, to end at 4,023.61 points, while the Nasdaq Composite gained 469.85 points, or 4.06%, to 12,032.42.
The Dow Jones Industrial Average rose 436.05 points, or 1.37%, to 32,197.59.