Stock Market Today (6/15/22): Fed Goes Big, Wall Street Approves – Kiplinger’s Personal Finance

The Federal Reserve isn’t messing around.

For months, America’s central bank largely telegraphed a 50-basis-point increase to its benchmark interest rate for its June policy meeting. But on Wednesday, it instead met recently stepped-up expectations spurred by still-sizzling inflation prints, announcing a 75-basis-point hike to a range of 1.5% to 1.75% – the largest such bump since 1994. Stocks ultimately finished higher, with a little help from Fed Chair Jerome Powell.

“Even two weeks ago, we might have thought that a 0.75% increase was off the table, at least in the short term. But with inflation not letting up, it’s become pretty clear that the Fed needs to take a more aggressive approach,” says Mike Loewengart, managing director of investment strategy for E*Trade, who adds that retail investors should expect continued volatility as the market digests the new norm. 

The Federal Reserve’s “dot plot” indicates that Federal Open Market Committee members see the benchmark rate hitting 3.4% by year’s end, and 3.8% by the end of 2023 – with the possibility of rate cuts in 2024.

It’s largely in the name of tamping down runaway consumer prices. The Fed, which predicted a 2.6% rate of inflation (based on the personal consumption expenditures, or PCE, index) back in December now sees a 5.2% rate by year-end 2022. And remember: The Fed’s continued goal is to get that number back down to 2%.

Interestingly, another unrelated announcement Thursday – the approval of another $1 billion in military aid to Ukraine – could help that particular cause, says Sean Bonner, a 20-year-plus Wall Street veteran and the CEO of self-directed investment app Guild. Bonner says a “timely and favorable outcome” in Russia’s war on Ukraine will increase global food supply, improve supply chain issues and rein in energy costs, which will benefit American consumers.

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“Since it was government spending that fueled the current inflation cycle, it is paradoxical that this spending can have a direct impact on reducing inflation.”

While stocks initially dipped following the Fed’s post-meeting release, they perked back up after Powell continued to signal flexibility on maintaining its aggressive stance at a press conference that followed. “Clearly, today’s 75-basis-point increase is an unusually large one, and I do not expect moves of this size to be common,” Powell said, adding that either a 50- or 75-basis-point rate increase was on the table for the July meeting.

The Nasdaq leaped to a 2.5% gain, finishing Wednesday’s trade at 11,099. The S&P 500 improved 1.5% to 3,789, while the Dow put up …….


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