Wall Street Strongly Rises, Fed Raises Interest Rates

On Wall Street, stock prices rose sharply on Wednesday for the second consecutive day after the U.S. central bank raised interest rates in line with expectations and indicated that further increases would follow to curb inflation.

The Dow Jones rose by 518 points or 1.55 percent, to 34,063 points, while the S&P 500 jumped 2.24 percent, to 4,357 points, and the Nasdaq index increased by 3.77 percent, to 13,436 points.

After a two-day meeting, Fed leaders raised the key interest rate yesterday for the first time since 2018, by 0.25 percentage points, in order to combat inflation, which has reached its highest levels in 40 years, estimating that this rate could be between 1.75 and 2 percent by the end of the year.

While the quarter-point increase in interest rates was in line with analysts’ expectations, the estimates for rate increases by the end of the year are higher than many anticipated.

As a result, immediately after the Fed’s messages, the Dow Jones and S&P 500 indices dipped into negative territory. However, they recovered after a press conference by Fed Chairman Jerome Powell.

Powell stated that the economy is strong enough to withstand the increase in interest rates and maintain the current strong trend of employment and wage growth. He also mentioned that the Fed must focus on limiting the impact of rising prices on households.

He indicated that inflation is expected to remain above the Fed’s target level of 2 percent until 2024 and that the central bank will aggressively raise interest rates if the situation does not improve.

Due to high inflation and the consequences of the war in Ukraine, the Fed has lowered its economic growth estimates for this year from 4 to 2.8 percent.

Despite the reduction in economic growth estimates and higher than expected projections for interest rate increases by the end of the year, Wall Street rose as, according to Jim Paulsen, a strategist at The Leuthold Group, investors breathed a sigh of relief, given that the Fed has shown it will do whatever it takes to curb inflation.

– The fact that the Fed is finally acting against inflation has somewhat reassured investors as it should help an economy struggling with high inflation – says Paulsen.

However, there are those who fear that the projected aggressive increase in interest rates, practically at every Fed meeting this year, could trigger an economic downturn.

– This looks like the Fed intends to induce a recession to tackle the inflation problem, and that is short-sighted, just as last year’s messages from the Fed that high inflation would be only temporary – says Scott Ladner, director at Horizon Investments.

European stock prices also rose sharply yesterday as investors were encouraged by signs of positive developments in negotiations between Russia and Ukraine.

The London FTSE index strengthened by 1.62 percent, to 7,291 points, while the Frankfurt DAX jumped 3.76 percent, to 14,440 points, and the Paris CAC rose 3.68 percent, to 6,588 points.

Asian Markets Rise

On Asian markets, stock prices rose on Thursday, especially in China, thanks to the announcement of new stimulus for the Chinese economy and markets, as well as yesterday’s surge in stock indices on Wall Street.

The MSCI Asia-Pacific index, excluding Japan, was up 3.6 percent around 7:00 AM, strengthening for the second consecutive day.

Meanwhile, on the Tokyo Stock Exchange, the Nikkei index rose by 3.4 percent, while stock prices in South Korea, Australia, Shanghai, and Hong Kong increased between 1.1 and 5.8 percent.

This morning, for the second consecutive day, Chinese markets rose the most, thanks to the announcement of new stimulus measures due to the slowing growth of the world’s second-largest economy.

The measures will benefit the struggling real estate sector, so this morning, shares of real estate companies are among the biggest gainers.

Stock prices of Chinese tech giants, such as Alibaba and Tencent, also surged after news that Chinese and U.S. market regulators are working on a plan that would allow the continuation of trading shares of Chinese companies on U.S. exchanges.

The Chinese tech sector has been under pressure for some time due to threats from the U.S. market regulator to delist some companies for non-compliance with certain rules.

Investors were also encouraged by news of positive developments in negotiations between Russia and Ukraine.