Indications of movement in the Ukraine conflict and above all the Fed interest rate hike drove the US stock exchanges vigorously on Wednesday. Wall Street was already clearly positive in the early part of the business, but on the evening after the decision by the US Federal Reserve to raise interest rates for the first time in a long time and to plan further, strong steps this year, it initially almost completely returned the gains away. In the last one and a half hours of trading, however, the mood turned significantly.
The technology-heavy Nasdaq index closed almost the daily high 3.8 percent firmer at 13,436 points. The Dow Jones rose 1.6 percent and the S&P 500 rose 2.1 percent.
Jim Paulsen, investment strategist at The Leuthold Group, said many investors were apparently simply relieved that the Fed had actually initiated the interest rate turnaround. “It’s somewhat reassuring to hear that the Fed is finally taking action to fight inflation.”
The Fed made it clear that Wednesday’s rate hike to a level of 0.25 to 0.5 percent will by no means remain the same. For the end of 2022, the monetary watchdogs consider a key interest rate level in a range of 1.75 to 2.0 percent to be appropriate. It could be pushed to 2.8 percent by the end of 2023. They are thus signaling a more aggressive course than many experts had expected. “That means the key interest rate could be raised at every meeting up to the end of the year,” said LBBW analyst Elmar Völker.
turning point for the financial markets
The Fed last hiked interest rates in late 2018. The reversal that took place despite the Ukraine war marks a turning point for the financial markets, which have benefited from the Fed’s ultra-loose course for years. According to Fed Chair Jerome Powell, the US economy is strong enough to withstand further rate hikes.
In addition to the hope of movement in the ceasefire negotiations between Russia and Ukraine on Wednesday, China also gave stockbrokers courage. The People’s Republic had declared that it would provide more economic stimulus and keep the markets stable. This gave the US stocks of Chinese technology companies drastic price jumps. Alibaba rose nearly 37 percent, Pinduoduo rose 56 percent.
In the bond market, eyes turned to Russia as $117 million in interest payments on dollar bonds fell due during the day. According to Russian Finance Minister Anton Siluanov, the country made the payments. However, because of the invasion of Ukraine, the West imposed sanctions on Russia that make international money transfers more difficult. It would be the first default since the Russian Revolution of 1917, when the Bolsheviks refused to recognize czar-era debts. Russian foreign currency bonds with a total volume of around 40 billion dollars are currently in circulation.