May 16, 2022

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Wall Street rose after the Fed's jump in interest rates

Wall Street rose after the Fed’s jump in interest rates

Right after the Fed rate meeting, there were few signs that the trading day would end with such a broad rally. The S&P 500 was tilted slightly to the positive side, with the Nasdaq up about 0.7 percent, and the Dow Jones down about 0.2 percent after the meeting, but the mood changed after that.

This is what Wall Street looks like at closing time:

  • The Standard & Poor’s 500 overall index rose 2.24 percent.
  • The technology-heavy Nasdaq index rose 3.77 percent.
  • The Dow Jones Industrial Average rose 1.55 percent

The rally continued from Tuesday when Wall Street opened Wednesday afternoon in Norwegian time, but fell significantly after the Federal Reserve’s interest rate announcement.

As expected, the key rate will be raised by a quarter of a percentage point, while the Fed is now announcing six more rate increases this year. The interest rate committee members envision a key interest rate of around 2% by the end of 2022.

More uncertainty

In addition to rising inflation and ongoing disruptions in supply chains, the Fed will now also have to take into account the war in Ukraine, as well as the new Corona boom in China. According to the Wall Street Journal, the latter two will put more pressure on rising inflation and value chain disruptions.

We are in a situation where everything is uncertain, Saxo Bank analyst Peter Garnery tells WSJ.

The interest rate on ten-year US government debt, often referred to as “the ten-year-old” and considered “the most important interest rate in the world,” barely rose until Wednesday and is now just over 2.1 per cent.

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Olaf Chen, Head of Global Pricing and Concern at Storebrand Asset Management, You think the market will follow that closely On how the Federal Reserve assessed the war and its impact on rising commodity prices.

He sees signs that the highest inflation rate in the US in more than 40 years could become more problematic.

– See globalization trends. There will be a growing decoupling between the United States and China, which will mean reduced global trade and increased costs. And if you really want to draw the devil on the wall, a green shift will also be able to push inflationary pressures higher. Chen says it has the potential to significantly increase cost requirements for investments.

Interest rates are expected to be raised six times this year

As it was read and agreed to raise the US policy rate on Wednesday, however, there is more tension regarding what the Fed and Central Bank Governor Jerome Powell will say about growth prospects, balance sheet reduction and how the conflict could affect the central bank’s monetary policy.

In addition to Wednesday’s expected rate hike, the market is pricing in five more Fed rate hikes in 2022, keeping the key policy rate at around 1.5 percent by December, according to the Financial Times.

In a speech to the US Congress earlier this month, Fed Chair Powell said the central bank was ready to start raising interest rates, despite developments in Ukraine in recent weeks.

“Dead Dragon Leap”

On Nasdaq there is a separate index where you can buy depository receipts of Chinese companies: the “Golden Dragon Index”. Custody certificates are certificates that represent the ownership of shares and are traded in the same way as shares.

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The index fell 10% on Thursday and Friday. This has never happened before within the pointer’s 22-year lifespan, and On Monday, the index fell by 11.73 percent.

Chinese companies with dual listings in the United States have come under strong regulatory pressure. Last week, the US Financial Services Commission (SEC) announced a first handful of Chinese stocks as part of a major review (“campaign”) of foreign companies that will not give US regulators access to the accounts, Bloomberg News writes. On Wednesday, however, the index is clearly pointing, rising above 17 percent.

according to CNBC The rise is due to the fact that on Wednesday, the Chinese and US authorities “reached an agreement” on a plan for companies listed on the dual stock exchange. The US website writes that the Chinese authorities “express their full support for the listing of Chinese overseas.”

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