Stock market indexes mixed after Fed meeting as Powell calms nerves possible hike

Fed calms market fears as stocks rise after policy meeting. Interest rates steady, Powell says rate hike unlikely. Inflation remains high.

US stocks experienced a surge as investors absorbed the latest developments from the Federal Reserve's policy meeting. With central bankers opting to maintain interest rates at their current levels, Federal Reserve Chairman Jerome Powell indicated that a rate hike was unlikely in the near future. This decision helped to alleviate concerns in the market, which had been anxious about the possibility of higher rates due to persistently high inflation.

The initial reaction to the news was positive, with the Dow Jones Industrial Average jumping by approximately 500 points. However, the gains were short-lived, as both the S&P 500 and the Nasdaq Composite ended the day lower. Despite this mixed performance, the decision to keep interest rates steady was in line with market expectations.

In a statement released following the meeting, the Federal Reserve emphasized that they would only consider cutting rates once they were confident that inflation was moving closer to their target of 2%. Powell acknowledged that while high prices had eased somewhat, inflation levels remained elevated. He also highlighted the uncertainty surrounding the future trajectory of inflation, indicating that further progress was necessary before any rate adjustments could be considered.

Investors had been on edge about the prospect of higher interest rates, particularly in light of the hotter-than-expected inflation readings in the first quarter. According to the CME FedWatch tool, the likelihood of the Fed cutting rates one or two times in 2024 is currently at 67%, with minimal expectations of a rate hike in June.

The Fed also announced a reduction in the pace of quantitative tightening, which could help ease financial conditions by injecting liquidity into the markets. Starting in June, the central bank will slow its balance sheet reductions to $25 billion per month, down from $60 billion per month.

Overall, the Fed's decision was viewed as a prudent approach to buying time and gaining more confidence in the inflation outlook. By focusing on the balance sheet adjustments and emphasizing the need for continued progress in inflation reduction, the central bank sought to reassure investors and maintain stability in the markets.

At the close of trading on Wednesday, the S&P 500 stood at 5,018.39, down 0.34%, while the Dow Jones Industrial Average rose by 0.23% to 37,903.29 points. The Nasdaq Composite ended the day down 0.33% at 15,605.48.

In other news, AI stocks faced a downturn following a weak forecast from AMD, while expectations for Apple's second-quarter earnings report were high. A contrarian indicator suggested a potential "buy" signal, and Kevin O'Leary predicted that interest rates would remain unchanged for the year. Additionally, Trump's proposal for significant tariffs if re-elected raised concerns about inflation, and Bitcoin faced a potential drop to $50,000 after breaching a key support level, according to Standard Chartered.

Commodities saw mixed movements, with WTI crude oil declining to $79.28 a barrel, while gold rose to $2,323.29 an ounce. The 10-year Treasury yield dropped to 4.62%, and Bitcoin slipped to $58,551.

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