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Wall Street Rises Sharply, Fed Indicates Tapering to End in March 2022

Wall Street ended sharply higher on Wednesday after the Federal Reserve said it would end its pandemic-era bond purchases in March as it exits from policies enacted at the start of the health crisis.

Following its two-day policy meeting, the Fed signalled its inflation target has been met, and its announcement on ending the bond purchases paved the way for three quarter-percentage-point interest rate increases by the end of 2022.

All three main U.S. stock indexes reversed earlier losses and climbed into positive territory. Wall Street extended those gains as Fed Chair Jerome Powell during his news conference struck an upbeat tone about the U.S. economic recovery and expressed willingness to raise interest rates as necessary to control inflation.

“What the markets are saying is, because the Fed is increasing their taper, maybe they feel inflation is under control,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta. “They did what was expected. It’s going to add to the credibility for the Fed and that will be – on balance – neutral to positive for the markets.”

The S&P 500’s sharp rise on Wednesday erased almost all of its losses from earlier this week and left it just short of its record-high close on Friday.

Wall Street Index Overview

The Dow Jones Industrial Average rose 1.08% to end at 35,927.43 points, while the S&P 500 gained 1.63% to 4,709.85. The Nasdaq Composite climbed 2.15% to 15,565.58.

TradingView Chart
The S&P 500 Index, one-year technical performance chart.

Volume on U.S. exchanges was 12.2 billion shares, strong compared with the 11.6 billion average over the last 20 trading days.

Inflation and higher interest rates have become a major concern on Wall Street in recent months. Data on Tuesday showed producer prices increased more than expected in the 12 months through November, clocking their largest gain since 2010. Last week’s consumer prices data showed the biggest gain in almost four decades. read more

“You had hedge funds positioned for the worst, in the terms of the worst for equities, coming into the Fed statement,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “Today, I think, is a function of selling the expectation and buying the news.”

Among the 11 S&P 500 sector indexes on wall street, technology jumped 2.7% and healthcare rallied 2.1%.

Apple Inc climbed 2.85% and Nvidia Corp rallied 7.49%, with both lifting the S&P 500 more than any other stock. The Philadelphia Semiconductor index jumped 3.7%.

TradingView Chart
Apple Inc, one-year technical performance chart.

Albemarle Corporation ended 1.67% lower after Goldman Sachs downgraded the lithium producer to “sell” from “neutral.”

Advancing issues outnumbered declining ones on the NYSE by a 1.85-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favoured advancers.

The S&P 500 posted 40 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 38 new highs and 545 new lows.