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Wall Street closed sharply higher on Wednesday after the Fed announced its May FOMC policy decisions that were in line with market’s expectations. Moreover, Fed Chairman Jerome Powell’s statement of a soft-landing of the central bank’s counter inflationary strategy significantly boosted market participants’ confidence. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) advanced 2.8% or 932.27 points to close at 34,061.61. Notably, all components of the 30-stock index ended in positive territory. The blue-chip index has registered its best single-day performance since Nov 9, 2020.
The tech-heavy Nasdaq Composite finished at 12,964.68, rising 3.2% or 401.11 points due to the strong performance of large-cap technology stocks. The tech-laden index has posted its best daily performance since Mar 16, 2022.
Meanwhile, the S&P 500 gained 3% or 124. 69 points to end at 4,300.17. The broad-market index has recorded its best daily performance since May 18, 2020. All 11 broad sectors of the benchmark index closed in positive zone.
The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF), the Materials Select Sector SPDR (XLB), the Technology Select Sector SPADR (XLK) and the Communication Services Select Sector SPDR (XLC) rallied 4.2%, 3.1%, 3.2%, 3.5% and 3.4%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 13.1% to 25.42. A total of 13.46 billion shares were traded Wednesday, lower than the last 20-session average of 11.97 billion. Advancers outnumbered decliners on the NYSE by a 3.98-to-1 ratio. On Nasdaq, a 2.39-to-1 ratio favored advancing issues.
Wall Street Appreciates Fed’s Decisions
In his post-FOMC statement, Fed Chairman Jerome Powell said that the central bank has decided to raise the benchmark interest rate by 50 basis points effective immediately. Notably, the Fed raised the lending rate by 25 basis points in its March FOMC, for the first time in more than three years. With this decision, the Fed fund rate has increased to 0.75-1%.
Moreover, the Fed has decided to shrink the size of its $9 trillion balance sheet in a phased manner affective Jun 1. Initially, the central bank will roll off $30 billion of Treasury Notes and $17.5 billion on mortgage-backed securities per month. After three months, the size of Treasury Note will increase to $60 billion and mortgage-backed securities will increase to $35 billion per month.
The decision of hiking the benchmark interest rate by 50 basis points in a FOMC is the highest since 2000. Market participants were expecting a 50 basis point rate hike and official announcement of the beginning of balance sheet reduction program in May FOMC.
A section of economists and financial experts remained concerned that the Fed may become highly aggressive with 75 basis point rate hike in May. However, Powell categorically said that the central bank is not seriously considering a 75 basis point rate hike. At the same time, he hinted that 50 basis points rate hike is likely to come in next two FOMC meetings. At present, the CME FedWatch data indicates the Fed fund rate to reach 2.75-3% by the end of 2022.
Economic Data
According to its national Employment report, Automatic Data Processing Inc. (ADP - Free Report) reveled that U.S. private sector added 247,000 jobs in April compared with upwardly revised 479,000 in March. Automatic Data Processing carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The U.S. Bureau of Economic Analysis reported that U.S. trade deficit jumped 22.3% to a record high $109.8 billion in March. Imports climbed 10.3% to $351.5 billion, while exports rose 5.6% to $241.7 billion.
The Institute of Supply Management reported that the U.S. services index dropped to 57.1% in April from 58.3% in March. The consensus estimate was 58.3%. The new orders index fell 5.5 points to 54.6%, the weakest reading in 14 months.
Uber Technologies Inc. (UBER - Free Report) incurred an adjusted loss of $0.18 per share in the first quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of $0.27. (Read More)
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Stock Market News for May 5, 2022
Wall Street closed sharply higher on Wednesday after the Fed announced its May FOMC policy decisions that were in line with market’s expectations. Moreover, Fed Chairman Jerome Powell’s statement of a soft-landing of the central bank’s counter inflationary strategy significantly boosted market participants’ confidence. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) advanced 2.8% or 932.27 points to close at 34,061.61. Notably, all components of the 30-stock index ended in positive territory. The blue-chip index has registered its best single-day performance since Nov 9, 2020.
The tech-heavy Nasdaq Composite finished at 12,964.68, rising 3.2% or 401.11 points due to the strong performance of large-cap technology stocks. The tech-laden index has posted its best daily performance since Mar 16, 2022.
Meanwhile, the S&P 500 gained 3% or 124. 69 points to end at 4,300.17. The broad-market index has recorded its best daily performance since May 18, 2020. All 11 broad sectors of the benchmark index closed in positive zone.
The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF), the Materials Select Sector SPDR (XLB), the Technology Select Sector SPADR (XLK) and the Communication Services Select Sector SPDR (XLC) rallied 4.2%, 3.1%, 3.2%, 3.5% and 3.4%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 13.1% to 25.42. A total of 13.46 billion shares were traded Wednesday, lower than the last 20-session average of 11.97 billion. Advancers outnumbered decliners on the NYSE by a 3.98-to-1 ratio. On Nasdaq, a 2.39-to-1 ratio favored advancing issues.
Wall Street Appreciates Fed’s Decisions
In his post-FOMC statement, Fed Chairman Jerome Powell said that the central bank has decided to raise the benchmark interest rate by 50 basis points effective immediately. Notably, the Fed raised the lending rate by 25 basis points in its March FOMC, for the first time in more than three years. With this decision, the Fed fund rate has increased to 0.75-1%.
Moreover, the Fed has decided to shrink the size of its $9 trillion balance sheet in a phased manner affective Jun 1. Initially, the central bank will roll off $30 billion of Treasury Notes and $17.5 billion on mortgage-backed securities per month. After three months, the size of Treasury Note will increase to $60 billion and mortgage-backed securities will increase to $35 billion per month.
The decision of hiking the benchmark interest rate by 50 basis points in a FOMC is the highest since 2000. Market participants were expecting a 50 basis point rate hike and official announcement of the beginning of balance sheet reduction program in May FOMC.
A section of economists and financial experts remained concerned that the Fed may become highly aggressive with 75 basis point rate hike in May. However, Powell categorically said that the central bank is not seriously considering a 75 basis point rate hike. At the same time, he hinted that 50 basis points rate hike is likely to come in next two FOMC meetings. At present, the CME FedWatch data indicates the Fed fund rate to reach 2.75-3% by the end of 2022.
Economic Data
According to its national Employment report, Automatic Data Processing Inc. (ADP - Free Report) reveled that U.S. private sector added 247,000 jobs in April compared with upwardly revised 479,000 in March. Automatic Data Processing carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The U.S. Bureau of Economic Analysis reported that U.S. trade deficit jumped 22.3% to a record high $109.8 billion in March. Imports climbed 10.3% to $351.5 billion, while exports rose 5.6% to $241.7 billion.
The Institute of Supply Management reported that the U.S. services index dropped to 57.1% in April from 58.3% in March. The consensus estimate was 58.3%. The new orders index fell 5.5 points to 54.6%, the weakest reading in 14 months.
Stocks That Have Made headline
UBER Shares Slip Nearly 5% Despite Q1 Earnings & Revenue Beat
Uber Technologies Inc. (UBER - Free Report) incurred an adjusted loss of $0.18 per share in the first quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of $0.27. (Read More)