Dow jumps 380 points, Nasdaq surges 2% in relief rally after Fed gives rate hiking timeline
U.S. stocks cut their losses and moved higher on Wednesday as the market got past one of the big uncertainties heading into year-end. The Federal Reserve signaled a more aggressive unwinding of its monthly bond buying, as expected by the market, and forecast multiple rate hikes on the way next year.
The S&P 500 rose 1.63% to 4,709.85, while the tech-heavy Nasdaq Composite jumped 2.15% to 15,565.58.
The Dow Jones Industrial Average added 383.25 points, or 1.08%, to close at 35,927.43.
All three were in negative territory for the day before the central bank’s decision.
The Fed announced on Wednesday that it would wind down its asset purchases, a process known as tapering, at a faster pace amid a continued rise in inflation. The Fed will be buying $60 billion per month of bonds starting in January, down from December’s rate of $90 million, and said that it will likely continue that trajectory in the months ahead.
The move comes as the central bank is grappling with the highest inflation level in nearly four decades. The Fed was widely expect to accelerate its taper this month.
This sets the stage for a dramatic policy shift that will clear the way for a first interest rate hike next year. The central bank signaled on Wednesday that its members see three hikes in 2022.
Fed Chairman Jerome Powell said at a new conference on Wednesday afternoon that the labor market is not fully recovered, pointed to a sluggish rebound in labor force participation, but said it was still appropriate to roll back some of the Fed’s pandemic-era policies.
“We’re not going back to the same economy we had in February of 2020. ... The post-pandemic labor market and economy in general, and the maximum level of employment that’s consistent with price stability evolves over time,” Powell said.
Reference: CNBC
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