May 25, 2022

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Stocks jump after Powell pushes back for even bigger price hikes after a half-point increase

Stocks jump after Powell pushes back for even bigger price hikes after a half-point increase

US stocks turned higher on Wednesday afternoon, as investors pondered the Federal Reserve’s latest monetary policy decision on the back of rising inflation and the still-tight US labor market.

The S&P 500, Dow and Nasdaq rose and extended gains on Wednesday afternoon, after Federal Reserve Chairman Jerome Powell suggested that a future 75 basis point interest rate hike was not currently under discussion among central bank officials. The benchmark 10-year Treasury yield rose to just under 3%, or near its highest level since late 2018.

Investors pondered the Federal Reserve’s monetary policy statement, in The central bank announced its decision to raise interest rates by 50 basis points for the first time since 2000. This increase was twice the 25 basis point increase the Fed launched in mid-March, which itself was the first rate hike since 2018. The latest increase brought the target range for the federal funds rate between 0.75% and 1.00%, compared to The current range is between 0.25% and 0.50%.

Expectations for such an excessive rate hike have been growing among market participants, especially with comments from key Federal Reserve officials seeming to support such a move. Powell He said during a public appearance with the International Monetary Fund earlier this month He believes it would be “appropriate…to move a little faster” on rate hikes, and that 50 basis points were “on the table” for May. In his press conference after the FOMC meeting on Wednesday afternoon, Powell also suggested the possibility of a half-point rate hike over the next two meetings.

The Fed also announced on Wednesday that on June 1, it will begin quantitative tightening, or asset withdrawals from the central bank’s $9 trillion balance sheet. With this, the Fed will first allow up to $47.5 billion per month in combined US Treasuries and mortgage-backed securities to exit the balance sheet. That pace will increase to $95 billion after three months.

As the Fed’s decision approaches, the prospect of higher interest rates has stirred up volatility in stock markets, which for the past two years have been accustomed to ultra-low interest rates and generally accommodative monetary policies. However, at the same time, many critics have suggested that the Federal Reserve has allowed its supportive pandemic-era policies to run longer than they should, allowing inflation to rise to the fastest rates since the 1980s. And after GDP growth turned negative in the US in the first three months of the year, there remains a lingering question whether the Fed will now be able to tighten policies without pushing the economy into a deep contraction.

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2:45 PM ET: Powell pushes back 75 basis points to raise interest rates

Federal Reserve Chairman Jerome Powell, during his Wednesday afternoon press conference, dismissed the idea that the Fed could raise interest rates by more than 50 basis points in upcoming meetings.

Powell said during the question-and-answer section of his press conference.

Regarding future policy position and what will guide the Fed’s decisions, Powell added, “The test is really just economic and financial conditions broadly evolving in line with expectations. And the expectation is that we’ll start to see inflation fade – not necessarily go down yet.” .”

1:55 PM ET: Stocks drift sideways towards Fed decision

Here’s where the markets were trading minutes before the Federal Reserve’s latest monetary policy decision:

11:28 a.m. ET: US service sector expansion slowed slightly in April: ISM

The US service sector saw a slight slowdown in growth in April compared to March, with higher prices and ongoing supply constraints weighing on the expansion.

The Institute for Supply Management’s services index for April fell to 57.1 from 58.3 in March, according to a new report on Wednesday. Consensus economists were looking for a slight increase to 58.5, according to Bloomberg data. Readings above the neutral level of 50.0 indicate expansion in a sector.

Under the benchmark, the ISM price sub-index rose to an all-time high of 84.6, indicating continued inflationary pressures. Meanwhile, the sub-inventory tracking index rose to 46.7, but remained in contraction territory for the second month in a row. The ISM services employment sub-index has fallen into contraction territory as well, falling to 49.5 from 54.0 in March.

“Growth continues in the service sector, which has expanded in all but two of the last 147 months. There was a decline in the composite index, mostly due to the pool of restricted employment (affecting the employment index) and the slowdown in the growth of new orders,” said Anthony Neves, President Institute for Supply Management, in a press release. “Business remains strong; However, high inflation, capacity constraints, and logistical challenges are drawbacks, and the Russo-Ukrainian War continues to affect material costs, most notably fuel and chemicals.”

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9:35AM ET: Stocks changed a bit

Here are the major moves in the markets as of 9:33 AM ET:

8:30 a.m. ET: US private payrolls missed expectations in April, rising by 247,000 vs. 383,000 expected

Salaries soared Less than expected in the US private sector last monthas employers work for Fill in ongoing vacancies to help meet demand.

Private sector salaries grew by 247,000 in April, ADP In its closely watched monthly report on Wednesday. That followed an increase of 479,000 jobs in the private sector in March, according to the revised monthly ADP report. Economists were unanimously looking for a private payroll increase of 383K, according to Bloomberg data.

The US service sector saw the biggest gain in private payrolls last month, with nearly every industry group returning jobs. However, job growth slowed compared to March, which contributed to the main slowdown in total private payroll gains. Leisure and hospitality employers added 77,000 jobs in April, which while still larger than any industry group, was less than half the payroll gains from March. This was followed by professional and business services, where salaries rose by 50,000 in April, and education and health services with gains of 48,000. In the commodity production sector, salaries have grown on the net in both the manufacturing, construction and mining industries.

Additionally, depending on company size, small businesses saw a significant drop in hiring last month. Small businesses, or those with 49 or fewer employees, shed a total of 120,000 jobs last month, while medium and large firms gained 46,321,000, respectively.

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7:39 a.m. ET: Uber posts better-than-expected quarterly results, guidance

Uber (Uber) published estimates topping first-quarter results and current-quarter guidance Wednesday morning, with the passenger-booking company noting that it was operating through a driver shortage while maintaining strong profitability.

Revenue more than doubled during the first quarter to $6.9 billion, topping estimates of $6.1 billion, according to data compiled by Bloomberg. Adjusted EBITDA increased to $168 million, also beating expectations of $135 million. Flights during the first quarter increased by 18% compared to last year to reach 17.1 billion, confirming the continued recovery in passenger demand.

For the current quarter, Uber said it expects total bookings between $28.5 million and $29.5 billion, and adjusted EBITDA between $240 million and $270 million.

Uber shares pared their losses in early trading after the results. Earlier during the evening session, Uber shares fell in sympathy with Lyft, which fell after the public transportation company presented current-quarter revenue and earnings expectations that did not live up to analysts’ expectations.

Uber was previously scheduled to report its quarterly results after the market closed on Wednesday, but after the Lyft report, it “has been rescheduled to provide a timely update on the company’s performance and guidance before the market opens.” According to a statement.

7:29AM ET Wednesday: Stock futures gains

This is where the markets were trading before the opening bell

  • S&P 500 futures contracts (ES = F.): +16.75 points (+0.4%) to 4186.00

  • Dow futures contractsYM = F.): +122 points (+0.37%) to 33155.00

  • Nasdaq futures contractsNQ = F.): +44.75 points (+0.34%) to 13,132.25

  • raw (CL = F.): + $3.88 (+ 3.79%) to $106.29 per barrel

  • He went (GC = F.): – $4.30 (-0.23%) to $1,866.30 per ounce

  • Treasury for 10 years (^ degeneration): +0.4 basis points to produce 2.962%

6:01pm ET Tuesday: Stock futures open mixed

Here’s where the markets are trading on Tuesday night:

  • S&P 500 futures contracts (ES = F.): +1.5 points (+0.04%) to 4170.75

  • Dow futures contractsYM = F.): -2 points (-0.01%) to 33,031.00

  • Nasdaq futures contractsNQ = F.): +22.75 points (+0.17%) to 13110.25

NEW YORK, NY – APRIL 28: Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City. The Dow Jones Industrial Average rose in morning trading as markets continued to move through a period of volatility due to inflation concerns and the war in Ukraine. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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