Our fees are changing on 4 March 2023. Learn more.

Stake logo

Share

Stocks slid in volatile session after U.S. Fed delivered another aggressive rate hike

The Federal Reserve raised rates by 75 basis points and forecast more sizable rate hikes in its fight against inflation, actions widely expected by traders.

The United States Federal Open Market Committee (FOMC) announced the decision to raise U.S. interest rates by 75 basis points, raising it to the range of 3.00-3.25% yearly.

The committee cited modest growth in production and production, as well as robust job gains, low unemployment and persistently high inflation as the main drivers of this decision.

Markets initially nose-dived after the release of the statement, in which the FOMC stated that it would continue to proceed with its balance sheet reduction as it continued to fight against inflation.

Despite the initial shock, markets seem to find some hope in the speech of FED president Jerome Powell in the press conference held after the statement release.

“We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 per cent,” Powell told reporters in Washington following the meeting. 

Powell affirmed that “it’s very likely there’ll be some softening in the labor market”, reassuring investors that the pace of future rate increases will be data dependent and that the pace could be slowed down to assess some of its effects, driving markets higher.

However, the chairman also said that the FED seeks to return to “sufficiently restricted rates” and that the housing market may have to go through a correction, which erased most of the bounce in equities that happened during the dovish remarks.

The FED president stated that the FOMC board is split between 100-125bps rate raises for the rest of 2022. This as the board revised its expectations for unemployment in 2022 to 3.8%, up just an inch from the 3.7% rate forecasted in June. For 2023, the committee expects interest rates to stay between 4.00 and 5.00%, before gradually tapering off in 2024 and the following years.

Market Reaction

The move by the Fed was mostly baked in by U.S. investors, particularly after last month’s CPI read.  Over the month the S&P 500 is down over 8% and 18% for 2022.

By the end of the day, the S&P 500 closed -1.7% lower, at 3,789 points. All major S&P 500 sectors finished the session in negative territory, led to the downside by consumer discretionary, communication services and growth-focused companies. 

The biggest gainers of the day were stocks of consumer staples, like General Mills (GIS)Kellogg (K) and Campbell Soup (CPB), as investors flocked to inflation and recession-proof stocks. 


Don’t have Stake?

Get $10 when you fund Stake AUS, a free US stock when you fund Stake Wall St. Do both, get both!

Terms & Conditions.


Stake logo
Download Stake
App Store logo
Google Play logo
Stakeshop Pty Ltd, trading as Stake, ACN 610105505, is an authorised representative (Authorised Representative No. 1241398) of Sanlam Private Wealth Pty Ltd (Australian Financial Services Licence No. 337927) ('Sanlam') and an authorised representative (Authorised Representative No. 1241398) of Airwallex Pty Ltd (Australian Financial Services Licence No. 487221) ('Airwallex'). Stake is not authorised by Airwallex under Airwallex’s AFSL to arrange for clients to be issued with securities as Airwallex is not authorised under its AFSL for this purpose. Stake is not authorised by Sanlam under Sanlam’s AFSL to arrange for clients to be issued with a non-cash payment facility as Sanlam is not authorised under its AFSL for this purpose. Stake SMSF Pty Ltd (‘Stake Super’) is not licensed to provide financial product advice under the Corporations Act. This specifically applies to any financial products which are established if you instruct Stake Super to set up a self managed super fund (‘SMSF’). When you sign up to Stake Super, you are contracting with Stake SMSF Pty Ltd who will assist in the establishment of a SMSF under a ‘no advice model’. You will also be referred to Stakeshop Pty Ltd to enable your trading account and bank account to be set up in order to use the Stake Website and/or App. Stakeshop Pty Ltd will also run marketing and promotions to you under. For more information about SMSFs, see our SMSF Risks page.The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services. At Stake and Stake Super, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Any advice given by Stake is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Financial Services GuideTerms & ConditionsPrivacy Policy and Disclaimers  before deciding to invest on or use Stake or Stake Super. By using our website or service in any way, you agree to our Privacy Policy and Terms & Conditions. All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance. Stake and Stake Super are registered trademarks in Australia.

Copyright © 2023 Stake. All rights reserved.