by On Wednesday, Wall Street ended a day during which markets had continued to seesaw, with investors digesting new hints about the approach of the US central bank regarding its monetary policy and its fight against inflation. This was after the minutes of the Fed’s last month’s meeting had been disclosed.
Central bank actions are the focus
This year’s first half saw global equities dealing with a brutal sell-off, which caused extreme nervousness among investors. They are now keeping a close eye on the actions of the central bank while trying to assess the impact on the economic growth of the massive interest rate hikes.
On Wednesday afternoon, the latest data was disclosed when the minutes of the US Federal Reserve’s meeting on June 14th and 15th were released. They provided insight into how the central bank had gone about increasing the interest rate so substantially. The minutes also highlighted the intent of the Fed to control prices for addressing the stubborn inflation and worries about people losing faith in the power of the central bank.
The meeting’s outcome saw the interest rate go up by 75 basis points, which is the biggest hike seen after 1994. The minutes disclosed that the policymakers believed 50 to 75 basis points would also be best for July.
Market expectations
Before the release of the minutes, investors had already priced in a hike of 75 basis points at the upcoming meeting of the Fed on the 26th and 27th of July. This means that both 50 and 75 basis points increases were on the table, which showed that the Fed was aware of the impact of the interest rate hike.
The minutes showed that participants were concerned about the possibility of a bigger impact on economic growth than anticipated. Market analysts said that the focus of the people was now on the terminal rate and the debate over the basic points was just about where it would go. A 50 basis points increase would see the terminal rate reach 3%, while a peak of 3.25%, or 3.5% could be expected with a 75 basis points increase. If the rate reaches 3.5% or above, the chances of recession increase by more than 50%.
Index movements
Before the minutes were published, all benchmark Wall Street indexes had been seesawing throughout the day. Even after the release, they continued to swing between positive and negative territory, but they were eventually able to record good gains by the time the markets closed.
There was a 0.23% increase in the Dow Jones Industrial Average, as it climbed by 69.86 points to reach 31,037.68. A 0.36% gain was recorded in the S&P 500, as it rose by 13.69 points to reach 3,845.08. As for the Nasdaq Composite, the tech-heavy index saw advanced by 0.35% to increase by 39.61 points and reach 11,361.85.
Out of the 11 sectors of the S&P 500, eight of them ended higher, with technology and utilities in the lead. The energy index turned out to be the biggest loser, as it fell 1.7% with crude prices reaching a 12-week low.
