Stocks Edge Higher as Investors Digest Fed Decision

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U.S. stocks swung between gains and losses after the Federal Reserve said it approved raising interest rates by half a percentage point.

The S&P 500 was recently up 0.6%, while the Dow Jones Industrial Average gained 0.7%. The Nasdaq Composite was ahead 0.2%.

Fed officials announced the rate decision, along with plans to start shrinking the central bank’s $9 trillion asset portfolio next month, at the conclusion of a two-day policy meeting Wednesday. Both announcements were largely expected.

Investors are now looking for insights into how Fed Chairman

Jerome Powell

plans to steer the central bank through the rest of its planned interest-rate increases. With stocks and bonds on shaky footing as of late, many investors are worried that the pace at which the Fed plans to tighten monetary policy will trip up markets. Others are grappling with fears that the central bank, which is raising rates swiftly to try to tamp down inflation, may inadvertently tip the economy into recession.

Investors will get a chance to hear from Mr. Powell later Wednesday afternoon, when he addresses reporters.

“This is the question markets are dealing with: Where is the Fed going? Is it really this series of rate hikes going to 5% or 6% that will end in the cooling of the economy?” said

Carsten Brzeski,

ING Groep’s

global head of macro research.

The U.S. economy remains strong despite the fact that it shrank in the first quarter of this year, Treasury Secretary

Janet Yellen

said Wednesday at The Wall Street Journal’s CEO Council Summit in London.

Consumer-discretionary stocks were among the bigger decliners in the market Wednesday. The group has taken a hit this year as investors facing higher interest rates have shied away from companies with higher valuations. Among technology stocks,

Amazon.com

and

Netflix

each lost more than 2%.

Corporate earnings also spurred volatility in the market Wednesday.

Airbnb

shares rose 1.7% after the company said it expects to post its first full-year net profit this year.

Starbucks

added 7.7% after the coffee chain said profits and sales grew in the most recent quarter. 

Lyft

shares slumped 33% after the ride-hailing company said it would invest in the current quarter to ensure adequate driver supply and grow its ride-hailing platform, spooking investors as the spending weighs on operating profit.

Federal Reserve Chairman Jerome Powell indicated on Thursday that the central bank was likely to raise interest rates by a half percentage point at its meeting in May. Photo: Samuel Corum/Getty Images

Meanwhile, government bond prices fell, with the yield on the benchmark 10-year Treasury note at 2.968%, compared with 2.957% Tuesday. Bond yields and prices move in opposite directions.

The bond market has been hit by its worst rout in decades as investors have grappled with accelerating inflation and the prospect of rapid interest-rate increases by the Fed. That has added to the turmoil across the stock market this year.

Traders worked on the floor of the New York Stock Exchange on Monday.

Photo:

Spencer Platt/Getty Images

Oil prices rallied after the European Union proposed banning imports of Russian crude within six months and banning imports of refined oil products from Russia by the end of the year. U.S. crude oil was last up 5.6% to $108.19 a barrel.

The boost to oil prices helped send energy shares higher. The S&P 500 energy sector was last up 1.5%.

Overseas, stocks were mostly lower. The pan-continental Stoxx Europe 600 lost 1.1%. Hong Kong’s Hang Seng fell 1.1%, and South Korea’s Kospi edged down 0.1%. Markets in mainland China and Japan were closed for a holiday.

Write to Caitlin Ostroff at [email protected] and Akane Otani at [email protected]

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