Wall Street has already taken the Federal Reserve’s interest-rate hike trajectory into account as U.S. stocks ended the day higher. Investors revised their expectations after Federal Reserve members said they plan to keep raising interest rates but are open to lowering their pace. As a result, US Stocks rallied as investors bet on easing of interest rate hikes, and inflation by the December end. Tuesday saw US stocks rise, closing near the day’s highs. S&P 500 closed higher by 1.36%, Dow 30 was up by 397 points or 1.18% while Nasdaq Composite also gained 1.36% at Tuesday’s close. Positive earnings reports from a few retailers, notably Best Buy Co. and Abercrombie & Fitch Co., also improved trading session morale.
US Fed had hiked rates by 75 basis points on November 2. On Wednesday, November 23, the minutes of the FOMC meeting that took place on November 1-2 will be made available. The release of the FOMC Minutes is closely watched by stock market investors as it provides the market with some cues about what the Federal Open Market Committee (FOMC) members believe about inflation and future rate hikes.
So far, the trading environment has been quite volatile in 2022. The volatility seems to be fading now. The S&P 500 has fluctuated by about 100 points between 3,900 and 4000 since it gained more than 5% on November 10 as a result of the better-than-expected October CPI print. The holiday season feels to be well underway, and trading volume has begun to decline.
The yield on 10-year Treasury notes decreased slightly from 3.825% on Monday to 3.770%. Meanwhile, concerns have been raised by an increase in Covid-19 cases in China only a few weeks after the expectation of loosened restrictions drove up global markets and commodity prices.
Energy was the best performer after lagging in the prior session while retail, dept. stores, toys, industrial/precious metals, chemicals, homebuilders, semis and drug distributors were among the other outperformers. Airlines and truckers were some of the laggards Dollar index down 0.6%, giving up much of Monday’s rally and gold finished little changed.