• CL-OIL


  • Cocoa-C


  • View more

Stock Market Reacts to Fed’s Mixed Signals on Rate Hikes and Inflation


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

Stocks experienced volatility on Wednesday as the Federal Reserve took a pause in its rate-hiking campaign while signalling progress in combating inflation. Despite this, the central bank also indicated its intention to implement two more rate hikes later in the year.

The S&P 500 managed to eke out a marginal gain, closing at 4,372.59 with a 0.08% increase, while the Nasdaq Composite saw a 0.39% rise to end the session at 13,626.48, supported by strong performances from Nvidia and AMD.

On the other hand, the Dow Jones Industrial Average dipped by 0.68%, or 232.79 points, closing at 33,979.33, primarily due to losses in UnitedHealth. Notably, both the S&P 500 and the Nasdaq reached their highest levels since April 2022 during the trading session.

As anticipated by traders, the Federal Reserve announced the maintenance of unchanged interest rates, breaking a streak of 10 consecutive rate hikes. However, the markets initially responded negatively as investors focused on the central bank’s projections, which indicated an imminent resumption of rate hikes. Ed Moya, senior market analyst at Oanda, expressed concerns over the Fed’s forecast, stating that the statement and projections were so hawkish that Wall Street may regret not raising rates that day.

Nonetheless, the sell-off stabilized to some extent when Fed Chair Jerome Powell, during the subsequent press conference, revealed that no decision had been made regarding the July meeting and emphasized the Fed’s progress in tackling inflation.

With the S&P 500 up over 13% this year and more than 25% from its bear market low, investors had been betting on the Fed’s impending cessation of rate hikes. Furthermore, recent economic indicators, such as May’s producer price index and consumer price index, have fueled optimism that the Fed is effectively combating inflation. The Federal Reserve’s next meeting is scheduled for July 25-26.

All sectors performance in reaction to Fed's Mixed Signals on Rate Hikes and Inflation.

Data by Bloomberg

On Wednesday, the stock market witnessed mixed performances across various sectors. The Information Technology sector led the gains with a significant increase of 1.14%. Consumer Staples and Real Estate sectors also recorded positive growth, rising by 0.56% and 0.32% respectively. Communication Services saw a modest gain of 0.13%.

However, several sectors experienced losses, with Energy and Health Care both declining by 1.12%. Financials, Materials, and Industrials sectors also faced declines of 0.37%, 0.43%, and 0.29% respectively. The Utilities sector saw a slight decrease of 0.07%, while Consumer Discretionary recorded a minor loss of 0.11%. Overall, Wednesday’s trading session displayed a mixed performance across sectors, reflecting the varied market dynamics of the day.

Major Pair Movement

The US Dollar Index (DXY) dropped to its lowest level in a month, reaching around 102.95, as market sentiment leaned towards a dovish stance for the US Federal Reserve (Fed). The Fed decided to keep interest rates unchanged, signalling a pause in the rate hike trajectory. However, the Fed Chair, Jerome Powell, delivered a bullish speech and hinted at a possible rate hike in July. The dot plot projections showed an increase in rates for 2024 and 2025, and the median rate forecasts suggested two more rate increases in 2023.

Despite the hawkish signals from the Fed, the EUR/USD continued to rise and closed at its highest level in a month above 1.0800. Attention now shifts to the upcoming European Central Bank (ECB) meeting, where a 25 basis point interest rate hike is expected. The language used in the ECB’s statement and President Lagarde’s comments during the press conference will be crucial for the Euro’s performance.

If the meeting turns out to be dovish, with hints of a potential pause in rate hikes, the Euro could face downward pressure. In the meantime, market focus will also be on key US economic data such as Retail Sales, Jobless Claims, and the Philly Fed Index.

Economic Data
CurrencyDataTime (GMT + 8)Forecast
AUDEmployment Change09:3018.6K
AUDUnemployment Rate09:303.7%
EURMain Refinancing Rate20:154.00%
EURMonetary Policy Statement20:15
USDCore Retail Sales m/m20:300.1%
USDEmpire State Manufacturing Index20:30-15.0
USDRetail Sales m/m20:30-0.2%
USDUnemployment Claims20:30246K
EURECB Press Conference20:45

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.