U.S. stock index futures were modestly higher in overnight trading Wednesday after the Federal Reserve delivered its biggest interest rate hike since 1994.
Futures contracts tied to the Dow Jones Industrial Average added 0.22%. S&P 500 futures were up 0.23%, while Nasdaq 100 futures were up 0.29%.
The major averages have ended Wednesday session is higher, with the Dow and S&P 500 both hitting five-day losing streaks. The 30-stock benchmark added about 304 points, or 1%, while the S&P 500 gained 1.46%. The tech-heavy Nasdaq Composite was the relatively better index, up 2.5%.
The Federal Reserve on Wednesday announced interest rate hike 75 basis pointswidely anticipated by the market.
“Clearly, today’s 75-basis-point gain is an unusually large one, and I don’t expect moves of this scale to be universal,” said the Federal Reserve Chairman. Jerome Powell said at a news conference after the decision.
Stocks edged higher after Powell said that 50 or 75 basis points increase “seems very likely” at its next meeting in July, showing the central bank’s commitment to fighting inflation. Powell was cautious, however, that decisions would be made “meet-by-meeting.”
Each member’s forecast shows that the Fed’s benchmark interest rate is now on track to end the year at 3.4%.
“At this point, the market has done most of the Fed’s work on selling off stocks and bonds over the past week – not to mention the year – so it’s no surprise that both markets are bullish. more today (stocks and bonds), said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
Despite Wednesday’s rebound, the key averages are still lower than last week and last month, and still well below their records.
The S&P 500 and Nasdaq Composite are both in bear market territory, down about 21% and 32% respectively from their January and November all-time highs. The Dow, meanwhile, is 17 percent lower, respectively. % from the all-time high on January 5.
Pervasive inflation, at a 40-year high, weighed on key averages, as did concerns around slowing economic growth and the possibility of a recession.
“The market has been very well prepared, even late,” said Michael Wilson, director of US equity strategy at Morgan Stanley. “There’s relief here,” he noted, before adding that price increases won’t solve the inflation problem overnight.
“It also increases the risk of a recession because you’re bringing rates up in the near term even faster, and I don’t think it’s going to help the bond market,” he said on CNBC’s “Overtime Closing Bell.”
Thursday’s economic data includes weekly jobless claims numbers, with economists surveyed by Dow Jones forecasting a figure of 220,000 prints. Groundbreaking for housing will also be released, while Adobe and Kroger will report quarterly updates.