Tech boom sees markets rise as fed hikes interest rate 0.75 percentage points

US stocks surged higher than expected following the Fed‘s decision to raise interest rates for the second month in a row Wednesday — as investors continue to watch the market for clues as to the current state of the economy.

The increases saw the S&P, Nasdaq, and Dow all swell by as much as two percent after the highly anticipated move from the central bank, which raised its key rate by .75 percentage points –  its most recent attempt at quelling rampant inflation.

The rise came as a surprise to many who expected the maneuver to further hamper the US economy, as higher interest rates tend to negatively affect earnings and stock prices.

However, shares Wednesday proceeded to defy investors’ expectations, almost immediately after the agency’s afternoon meeting, partially thanks to a slight tech boon headed by industry leaders Microsoft and Google parent Alphabet. 

Both companies reported earnings that were better than investors had feared,  potentially fueling the market rise.

The increases saw the S&P, Nasdaq, and Dow all swell by as much as two percent after the highly anticipated move from the central bank, raising its key rate by .75 percentage points as it attempts to quell inflation

The increases saw the S&P, Nasdaq, and Dow all swell by as much as two percent after the highly anticipated move from the central bank, raising its key rate by .75 percentage points as it attempts to quell inflation

The rise came as a surprise to many who expected the maneuver to further hamper the US economy, as higher interest rates tend to negatively affect earnings and stock prices. Pictured is a trader on the floor of the NY Stock Exchange on Wednesday during the rise

The rise came as a surprise to many who expected the maneuver to further hamper the US economy, as higher interest rates tend to negatively affect earnings and stock prices. Pictured is a trader on the floor of the NY Stock Exchange on Wednesday during the rise

As a result, the S&P 500 index was up 1.4 percent as of 3:07pm – an increase that more than made up for the benchmark index’s losses from the day prior amid some uncertainty about the Fed’s planned course of action. 

The Dow, meanwhile, was up 0.2 percent, roughly 130 points, and the tech-heavy Nasdaq Composite was up 2.5 percent.

Those gains, like other stocks, transpired in the buildup to the Fed’s expected announcement, and were subsequently maintained afterwards. 

The development comes during a key week in financial markets, with traders around the world closely watching the interest-rate decision, the Fed’s main tool to fight inflation.

The number describes the short-term borrowing rate for commercial banks, which then passes that rate on to consumers and businesses.

The Dow Jones Industrial Average was up 0.2 percent and the tech-heavy Nasdaq Composite was up a whopping 2.5 percent Wednesday afternoon shortly after the Fed's announcement

The Dow Jones Industrial Average was up 0.2 percent and the tech-heavy Nasdaq Composite was up a whopping 2.5 percent Wednesday afternoon shortly after the Fed’s announcement

Investors will be watching for any clues from the agency to any further interest rate increases for the rest of the year, and whether officials will eventually reverse and cut rates next year. 

A press conference held by Fed Chairman Jerome Powell shortly after the announcement shed more light on those plans, as inflation rates continue to rise to levels not seen in decades.

The conference saw the official claim that the US is not in a recession and that the Fed was not against another, similar hike.

After announcing the 75 basis point hike, Powell hinted to reporters that the Fed would not be against further hikes in the near future, saying the bank ‘wouldn’t hesitate to make an even larger move’ if necessary.  

He added that he expects inflation rates – which hit 9.1 percent last month, the highest in 41 years – to eventually dip by 2 percent as a result of the recent raise.

‘We’re not trying to have a recession, and we don’t think we have to,’ Powell, 69, said.

The conference saw the official assert that the US is not in a recession, given the fact that monthly payroll growth has averaged 450,000 jobs as of late, and that employers added 2.7 million jobs in the first half of 2022.

‘I do not think that the U.S. is currently in a recession,’ he said, ‘and the reason is there are just too many areas of the economy that are performing too well.’

He went on to maintain that the current economic downturn is only a result of exceptional growth seen last year, when the US began to slowly recover from economic losses incurred during the pandemic. 

Chairman Powell held a news conference after the Fed decided to once again raise interest rates by three-quarters of a percentage point on Wednesday. The conference saw the official assert that the US is not in a recession and that the Fed was not against another hike

Chairman Powell held a news conference after the Fed decided to once again raise interest rates by three-quarters of a percentage point on Wednesday. The conference saw the official assert that the US is not in a recession and that the Fed was not against another hike

Federal Reserve Board Chairman Powell told reporters and committee members Wednesday that the country's economy has slowed only because it saw gains last year, as America started to recover from the pandemic

Federal Reserve Board Chairman Powell told reporters and committee members Wednesday that the country’s economy has slowed only because it saw gains last year, as America started to recover from the pandemic

‘Growth is slowing for reasons that we understand,’ Powell told the press and federal committee. ‘Growth was exceptionally high last year, 5.5%. We would have expected growth to slow. There’s also more slowing going on now.’ 

He added: ‘It doesn’t make sense that the economy would be in recession.’

The Federal interest rate is now at 2.33 percent following Wednesday’s hike as the central bank acts aggressively to curb inflation

Officials expect three additional hikes by next year as the Fed is expected to hit its benchmark rate near 3.5 percent.

Chair Powell hopes that by making borrowing gradually more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services, thereby slowing inflation.

The markets’ performance Wednesday comes as a welcome sign for Powell and other members of the Central Bank.

The rise in interest rates will lead to American's monthly mortgage, credit card, and loan payments to go up. The opportunity to save more is also available as savings accounts will see better returns

The rise in interest rates will lead to American’s monthly mortgage, credit card, and loan payments to go up. The opportunity to save more is also available as savings accounts will see better returns

Federal interest rates were raised by 0.75 percent, again, on Wednesday, matching last month's historic hike

Federal interest rates were raised by 0.75 percent, again, on Wednesday, matching last month’s historic hike

Federal interest rates were cut to near zero to aid the country through the coronavirus pandemic in April 2020

Federal interest rates were cut to near zero to aid the country through the coronavirus pandemic in April 2020

Pictured: The breakdown of federal interest rate cuts and hikes by president since 1980

Pictured: The breakdown of federal interest rate cuts and hikes by president since 1980

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