Stocks roar after Fed shies away from 75 basis point hike

Source: The Hill | May 4, 2022 | Tobias Burns

U.S. stocks had their best day since May 2020 after Federal Reserve Chair Jerome Powell reassured investors that nothing larger than a 50 basis point rate hike was being considered to rein in inflation.

The Dow Jones Industrial Average of major U.S. stocks rose 938 points to top 34,000, a gain of more than 2.8 percent.

The S&P 500 index jumped nearly 3 percent to top 4,300 points after a previous close of 4,175. The technology-heavy Nasdaq rose more than 400 points for a gain of nearly 3.2 percent.

The surge in equity values comes as investors were bracing for the latest numbers on interest rate hikes from the Federal Reserve amid 40-year high inflation.

The policy-setting Federal Open Markets Committee voted unanimously to raise its benchmark rate by half a percentage point, or 50 basis points, the largest rate increase in more than 20 years.

“There is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings,” Powell said.

While the rate hike is the highest since 2000, investors seemed satisfied that it wasn’t any higher and that record inflation wasn’t spurring even more drastic action from the Fed.

“A 75 basis point increase is not something that the committee is actively considering,” Powell said.

The Fed is performing delicate maneuvers now as it seeks to cool off an overheated economy without driving it into a recession.

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