4:16pm: Interest rates aren't likely to decline any time soon
The Dow closed Wednesday down 270 points, 0.8%, at 33,414, the Nasdaq Composite fell 55 points, 0.5%, to 12,025 and the S&P 500 slid 29 points, 0.7%, to 4,091. The small-cap Russell 2000 improved 9 points, 0.5%, to 1,741.
The market nosedived in the afternoon after the Fed announced a unanimous decision to raise interest rates by 0.25%. This was the expected outcome, but Federal Reserve Chairman Jerome Powell said the body would not cut interest rates in the near future.
“In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said in a statement.
Interest rates are at their highest level since August 2007.
2:20pm: Dow climbs out of the red
The Federal Open Market Committee decided unanimously to raise interest rates by another 0.25 percentage points, bringing the Fed funds rate to a target range of 5%-5.25%, the highest since August 2007.
“The third consecutive 25 basis interest rate hike reflects the Federal Reserve’s ongoing battle to tame inflation and brings the Federal Reserve rate above 5% for the first time in almost 16 years," said Srijan Katyal, global head of strategy and trading services at the international brokerage ADSS:
This was the consensus expectation, and markets responded modestly positively.
Shortly after the announcement, the Dow added 1 point to 33,686, the Nasdaq Composite grew 58 points, 0.5%, to 12,138 and the S&P 500 added 8 points, 0.2%, to 4,128.
12:05pm: Investors await the Fed’s interest rate decision at 2 PM EDT
US stocks were mixed in noon trading as investors cautiously awaited the Federal Reserve’s interest rate decision and commentary post 2 pm EDT today.
At midday, the Dow lost 13 points to 33,671, while the S&P 500 added 5 points at 4,125 and the tech-heavy Nasdaq gained 38 points to 12,119.
“The old rule of thumb was that it takes upwards of 12 months to see the impact of rate hikes,” US Bank Wealth Management global investment strategist Tom Hainlin said.
“So we probably haven’t yet seen the impact from all of these cumulative rate hikes, including the one we’re likely to have today,” he added.
Notable movers included shares of The Estée Lauder Companies Inc, which slid 17% after the cosmetics company slashed its full-year sales guidance, citing a slower-than- expected recovery in Asia.
9:35am: Private payrolls sweep past forecasts
US stocks were muted at the open on Wednesday as investors awaited the Federal Reserve’s highly anticipated interest rate verdict being handed down at 2pm Eastern Time.
Just after the market opened, the S&P 500 was up 6 points or 0.2% at 4,126 points, the Dow Jones had added 46 points or 0.1% at 33,731 points, and the Nasdaq was up 14 points or 0.1% at 12,095 points.
Meanwhile, US private employers added 296,000 jobs in April according to the ADP National Employment Report. Analysts had been expecting an increase of 150,000.
The ability of ADP to accurately reflect changes in the labor market since it revised its methodology was questioned by Pantheon Macroeconomics chief economist Ian Shepherdson.
“ADP has understated the official payroll numbers in six of the past eight months since its new methodology was introduced, and on the two occasions when it has overstated payrolls, the error was very small,” he said.
“Other April payroll indicators are much weaker, with NFIB hiring intentions signalling a 150,000 private payroll gain, while the Homebase numbers signal roughly zero. In short, don’t bet the farm on this one.”
7:50am: Modest gains ahead of rate decision
Wall Street is expected to open modestly higher as investors look to the US Federal Reserve's rate decision later today amid predictions that rate setters will deliver a 25-basis point interest rate hike as they look to rein in inflationary pressures.
Beyond monetary policy, investors are also looking to the upcoming non-farm payrolls numbers on Friday before taking on new positions.
Futures for the Dow Jones Industrial Average rose 46 points in pre-market trading, while those for the broader S&P 500 rose 10.2 points and contracts for the Nasdaq-100 also rose 37.5 points.
"Markets are currently pricing an 85% probability of a 25-basis point move today, the hope for equity bulls is that this move maybe the final rate increase in this cycle," TickMill Group market analyst Patrick Munnelly said.
With that in mind, upcoming data will be key, with today's ADP employment report like to provide some insight.
"The focus is squarely on this evening's FOMC rate decision, however, ahead of the headline event, investors will get some insight into the employment landscape ahead of Friday's non-farm payrolls release," added Munnelly.
He noted that the ADP employment survey data is expected to reveal a small increase to 150,000 from 145,000 in the previous month.
Also out today is the US ISM service sector index which will give an important snapshot of the economy.
Contact the author at jon.hopkins@proactiveinvestors.com