Stocks jump after Powell pushes back on bigger rate hikes after half-point increase

U.S. stocks turned higher Wednesday afternoon, with investors considering the Federal Reserve’s latest monetary policy decision against the backdrop of elevated inflation and a still-tight U.S. labor market.

The S&P 500, Dow and Nasdaq each rose and extended gains Wednesday afternoon, after Fed Chair Jerome Powell suggested future 75 basis point interest rate hikes were not currently in discussion among central bank officials. The benchmark 10-year Treasury yield rose to just below 3%, or near its highest level since late 2018.

Investors mulled the Federal Reserve’s monetary policy statement, in which the central bank announced its decision to raise interest rates by 50 basis points for the first time since 2000. This increase was double the 25 basis-point increase the Fed unleashed in mid-March, which itself had been the first rate hike since 2018. The latest hike brought the target range for the federal funds rate between 0.75% and 1.00%, compared to the current range of between 0.25% and 0.50%.

Expectations for this supersized rate hike had been building amid market participants, especially given commentary from key Federal Reserve officials appearing to support such a move. Powell said during a public appearance with the International Monetary Fund earlier this month that he believed it would be “appropriate … to be moving a little more quickly” on raising rates, and that 50 basis points were “on the table” for May. And in his post-FOMC meeting press conference Wednesday afternoon, Powell also suggested additional half-point rate hikes were also possible over the next couple of meetings.

The Fed also announced Wednesday that on June 1, it would begin quantitative tightening, or rolling assets off the central bank’s $9 trillion balance sheet. With this, the Fed will first allow up to $47.5 billion per month in combined U.S. Treasuries and mortgage-backed securities to run off the balance sheet. This pace will increase to $95 billion after three months.

Story continues

Heading into the Fed decision, prospects of higher interest rates have stirred up volatility in equity markets, which had grown accustomed over the past two years to ultra-low interest rates and generally easy-money monetary policies. At the same time, however, many pundits have suggested the Fed allowed its pandemic-era supportive policies to run too long, allowing inflation to soar to the fastest rates since the 1980s. And after GDP growth turned negative in the U.S. in the first three months of the year, a lingering question remains whether the Fed will now be able to tighten policies without tipping the economy into a deep downturn.

—

4:06 p.m. ET: Stocks jump after Fed raises rates by 50 basis points: Dow adds 932 points, or 2.8%, Nasdaq gains 3.2%

Here were the main moves in markets as of 4:06 p.m. ET:

• S&P 500 (^GSPC): +124.69 (+2.99%) to 4,300.17

• Dow (^DJI): +932.27 (+2.81%) to 34,061.06

• Nasdaq (^IXIC): +401.10 (+3.19%) to 12,964.86

• Crude (CL=F): +$5.64 (+5.51%) to $108.05 a barrel

• Gold (GC=F): +$14.20 (+0.76%) to $1,884.80 per ounce

• 10-year Treasury (^TNX): -4.3 bps to yield 2.9170%

—

2:45 p.m. ET: Powell pushes back on 75 basis point interest rate hikes

Federal Reserve Chair Jerome Powell, during his press conference Wednesday afternoon, pushed back against the notion that the Fed might raise interest rates by more than 50 basis points in the coming meetings.

“A 75 basis point increase is not something the committee is actively considering … there’s a broad sense among the committee that additional 50 basis point increases should be on the table at the next couple of meetings,” Powell said during the question and answer portion of his press conference.

With regard to future policy-setting and what would inform the Fed’s decisions, Powell added, “The test is really just economic and financial conditions evolving broadly in line with expectations. And expectations are that we’ll start to see inflation flattening out — not necessarily declining yet.”

—

1:55 p.m. ET: Stocks drift sideways heading into Fed decision

Here’s where markets were trading minutes before the Fed’s latest monetary policy decision:

• S&P 500 (^GSPC): +9.92 (+0.24%) to 4,185.40

• Dow (^DJI): +97.74 (+0.30%) to 33,226.53

• Nasdaq (^IXIC): -2.68 (-0.02%) to 12,561.08

• Crude (CL=F): +$5.12 (+5.00%) to $107.53 a barrel

• Gold (GC=F): -$3.30 (-0.18%) to $1,867.30 per ounce

• 10-year Treasury (^TNX): +2.9 bps to yield 2.9890%

—

11:28 a.m. ET: U.S. services sector expansion decelerated slightly in April: ISM

The U.S. services sector saw growth slow slightly in April compared to March, with rising prices and ongoing supply constraints weighing on the expansion.

The Institute for Supply Management’s April Services index dipped to 57.1 compared to March’s 58.3, according to a new report Wednesday. Consensus economists were looking for a slight increase to 58.5, according to Bloomberg data. Readings above the neutral level of 50.0 indicate expansion in a sector.

Beneath the headline index, the ISM prices subindex rose to an all-time high of 84.6, indicating ongoing inflationary pressures. Meanwhile, a subindex tracking inventory sentiment rose to 46.7, but remained in contractionary territory for a second straight month. The ISM services employment subindex fell into contractionary territory as well, declining to 49.5 from 54.0 in March.

“Growth continues for the services sector, which has expanded for all but two of the last 147 months. There was a pullback in the composite index, mostly due to the restricted labor pool (impacting the Employment Index) and the slowing of new orders growth,” Antthony. Nieves, chair of the Institute for Supply Management, said in a press statement. “Business activity remains strong; however, high inflation, capacity constraints and logistical challenges are impediments, and the Russia-Ukraine war continues to affect material costs, most notably of fuel and chemicals.”

—

9:35 a.m. ET: Stocks open little changed

Here were the main moves in markets as of 9:33 a.m. ET:

• S&P 500 (^GSPC): +1.28 (+0.03%) to 4,176.76

• Dow (^DJI): +4.50 (+0.01%) to 33,133.29

• Nasdaq (^IXIC): -20.90 (-0.15%) to 12,544.49

• Crude (CL=F): +$4.65 (+4.54%) to $107.06 a barrel

• Gold (GC=F): unchanged at $1,870.60 per ounce

• 10-year Treasury (^TNX): +1.9 bps to yield 2.9790%

—

8:30 a.m. ET: US private payrolls missed expectations in April, rising by 247,000 vs. 383,000 expected

Payrolls rose less-than-expected in the U.S. private sector last month, as employers worked to fill persistent vacancies to help meet demand.

Private-sector payrolls grew by 247,000 in April, ADP said in its closely watched monthly report on Wednesday. This came following an increase of 479,000 private payrolls in March, according to ADP’s revised monthly print. Consensus economists were looking for private payrolls to rise by 383,000, according to Bloomberg data.

The U.S. services sector saw the largest gains in private payrolls last month, with nearly every industry group adding back jobs. However, job growth slowed compared to March, contributing to the headline deceleration in total private payroll gains. Leisure and hospitality employers added back 77,000 jobs in April, which while still the most of any industry group, was less than half the gain in payrolls from March. This was followed by professional and business services, with payrolls rising by 50,000 in April, and education and health services with gains of 48,000. In the goods-producing sector, payrolls grew on net in each of the manufacturing, construction and mining industries.

Plus, by company size, small business saw a marked downturn in employment last month. Small businesses, or those with 49 employees or fewer, shed a total of 120,000 payrolls last month, while medium and large businesses gained 46,000 and 321,000, respectively.

—

7:39 a.m. ET: Uber posts better-than-expected quarterly results, guidance

Uber (UBER) posted estimates-topping first-quarter results and current-quarter guidance Wednesday morning, with the ride-hailing company signaling it was working through driver shortages while maintaining solid profitability.

Revenue more than doubled during the first quarter to reach $6.9 billion, topping estimates for $6.1 billion, according to Bloomberg-compiled data. Adjusted EBITDA increased to $168 million, also coming in ahead of the $135 million expected. Trips during the first quarter increased by 18% over last year to reach 17.1 billion, underscoring the ongoing recovery in rider demand.

For the current quarter, Uber said it sees gross bookings coming in between $28.5 million and $29.5 billion, and adjusted EBITDA of between $240 million and $270 million.

Uber shares pared losses in early trading following the results. Earlier during the overnight session, Uber shares had slumped in sympathy with Lyft’s stock, which slid after the ride-hailing company offered a current-quarter revenue and profit forecast that fell short of analyst expectations.

Uber was previously scheduled to report its quarterly results after market close on Wednesday, but after Lyft’s report, “rescheduled to provide a more timely update on the company’s performance and guidance before the market opens,” according to a statement.

—

7:29 a.m. ET Wednesday: Stock futures gain

Here’s where markets were trading ahead of the opening bell

• S&P 500 futures (ES=F): +16.75 points (+0.4%) to 4,186.00

• Dow futures (YM=F): +122 points (+0.37%) to 33,155.00

• Nasdaq futures (NQ=F): +44.75 points (+0.34%) to 13,132.25

• Crude (CL=F): +$3.88 (+3.79%) to $106.29 a barrel

• Gold (GC=F): -$4.30 (-0.23%) to $1,866.30 per ounce

• 10-year Treasury (^TNX): +0.4 bps to yield 2.962%

—

6:01 p.m. ET Tuesday: Stock futures open mixed

Here’s where markets were trading Tuesday evening:

• S&P 500 futures (ES=F): +1.5 points (+0.04%) to 4,170.75

• Dow futures (YM=F): -2 points (-0.01%) to 33,031.00

• Nasdaq futures (NQ=F): +22.75 points (+0.17%) to 13,110.25

—

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Instagram, YouTube, Facebook, Flipboard, and LinkedIn