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Dow trades around 200 points higher as Fed says it ‘will soon be appropriate’ to lift interest rates

MarketWatch
MarketWatch
 2022-01-26
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By Marketwatch
MARKET PULSE

U.S. stocks benchmarks was climbing but off its highs off the session Wednesday, as the Federal Reserve, as expected didn’t take any action for this meeting, keeping benchmark rates at a range between 0% and 0.25%, but laid the groundwork for a rate increase as early as March.

That said, there was no commitment to a move at the central bank’s next meeting in mid-March. With consumer inflation now at a 7% annual rate, the Fed wants to get going and move away from its easy-policy stance. The Fed decided today to continue the gradual pace of monthly asset purchases so that they will end in March.

The central bank’s rate-setting Federal Open Market Committee said that it “will soon be appropriate” to lift rates. In a separate document, the central bank said it could start shrinking its nearly $9 trillion balance sheet after interest-rate hikes start.

“With inflation well above 2% and a strong labor market, the FOMC expects it will soon be appropriate to raise the target range for the federal-funds rate,” the Fed said in its policy statement.

Federal Reserve Chairman Jerome Powell is set to host a news conference to discuss the central bank’s policy later in the session at 2:30 p.m. Eastern Time.

This week thus far stocks have been knocked around by expectations that the FOMC would kick off a series of rate increases to combat building inflationary pressures, removing a level of liquidity and rates near 0% that speculators have enjoyed for years.

  • The Dow Jones Industrial Average (DJIA) traded 200 points, or 0.5%, higher to 34,482.
  • The S&P 500 index (SPX) advanced 50 points, or 1.1%, to 4,407.
  • The Nasdaq Composite Index (COMP) climbed 284 points, or 2.1%, to reach 13,825.
  • The 10-year Treasury note rate (BX:TMUBMUSD10Y) was at around 1.80%, compared with around 1.78% before the policy statement.
  • Gold futures (GCG22) (GC00) tumbled, falling $22.80, or down 1.2%, to settle at $1,829.70 an ounce, after touching a two-month high on Tuesday, but retraced some losses in electronic trade on Globex after the Fed decision.

Against that backdrop, yields have risen and rate-sensitive segments of the market, such as the tech-heavy Nasdaq Composite Index, have fallen as investors discount cash flows for once-highflying corporations in the face of inflation and rising rates.

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