A full recap of the Fed's rate hike and big market rally

Fred Imbert

The Federal Reserve raised rates by 50 basis points, as was widely expected. But it was Chairman Jerome Powell's comments that sparked a sharp rally in stocks. Powell said that the Fed wasn't considering raising rates by 75 basis points. The major U.S. stock benchmarks surged to their highs of the day on those remarks.

Wed, May 4 2022 3:37 PM EDT

Gary Cohn says Powell gave the market the policy transparency it wanted

Former Goldman Sachs President Gary Cohn told CNBC he thinks Fed Chair Jerome Powell "drove it right down the middle of the road" during his news conference, perfectly meeting the market's expectations as evidenced by the relief rally in stocks. 

In particular, Cohn said the market appreciated Powell's clear communication around the Fed's approach to quantitative tightening. "The market has been trained to have transparency, and we got transparency," said Cohn, who also led the National Economic Council under former President Donald Trump.

He added that he believes Powell laid the roadmap for two more 50 basis point interest rate hikes at upcoming meetings.

Kevin Stankiewicz

Wed, May 4 2022 3:36 PM EDT

Stocks rally broadly after Powell comments, financials and tech jump

U.S. stocks rallied across the board Wednesday after Fed Chair Powell in the press conference ruled out larger rate hikes and emphasized the possibility of a soft landing — tamping down inflation without inducing a recession.

All 11 S&P 500 sectors were positive on the day in the last hour of trading.

Stocks leveraged to an improving economy were among the biggest winners. Energy was the top-performing sector. Financial names were also a leading group, with names like Bank of America and Wells Fargo jumping roughly 4%.

Technology stocks, which have been under pressure, also climbed. Communication services and information tech were among the top S&P 500 sectors. The moves came as the benchmark 10-year Treasury yield dipped. Apple rose more than 3%, and Meta Platforms gained roughly 5%.

—Hannah Miao

Wed, May 4 2022 3:34 PM EDT

Market is applauding Powell's comments, LPL's Krosby says

The major averages were up sharply heading into the close, with the Dow up 900 points.

"The market is applauding Chairman Powell's comments that the economy remains strong thanks to solid corporate balance sheets and still cash-rich consumers,: said Quincy Krosby, chief equity strategist at LPL Financial. "Moreover, he suggested that perhaps the worst of the sharp move in inflationary pressures may be poised to ease."

"Still, Powell underscored that while the FOMC remains data dependent for each meeting, the market can expect 50 basis point hikes at the next two meetings. He made it clear that corralling inflationary pressures is crucial," Krosby added.

Fred Imbert

Wed, May 4 2022 3:26 PM EDT

Powell news conference wraps up

Federal Reserve Chairman Jerome Powell has concluded an eventful news conference, which saw the major U.S. stock benchmarks rally on remarks that the Fed would not raise rates by 75 basis points.

Fred Imbert

Wed, May 4 2022 3:24 PM EDT

Federal Reserve will restore stable pricing as 'quickly and effectively' as it can, Powell says

Chairman Jerome Powell believes the Federal Reserve has a "good chance" of restoring stable prices without causing a strong increase in unemployment.

"We need to do everything we can to restore stable prices as quickly and effectively as we can," Powell said. "We think we have a good chance to do it without a significant increase in unemployment or a really sharp slowdown." 

While the move may not be "pleasant" and requires higher rates in the short-term, everyone will benefit in the long run, Powell said. Those on fixed income or lower end of income distribution particularly benefit from stable prices, he added.

"We think about the medium and longer-term and everyone will be better off if we can get this job done," he said. "The sooner the better."

— Samantha Subin

Wed, May 4 2022 3:17 PM EDT

Powell's comments on rates, economy soothed investors and triggered rally

State Street Global Advisors chief investment strategist Michael Arone said the Federal Reserve delivered on its guidance and eased investors' concerns about the path of its rate hiking.

He said Fed Chairman Jerome Powell soothed markets with his comments, including when he said a 75 basis point hike was not currently under consideration. The Fed raised interest rates by a half percent Wednesday afternoon, the biggest hike since the year 2000.

"I think there's three things" in Powell's comments, Arone said. "They're not actively considering 75 basis points. There's some evidence that inflation may have peaked. And thirdly, he acknowledged it won't be easy but he thinks a soft landing is still possible because households, businesses and the labor markets remain in good shape."

The chairman also said the Fed could consider 50 basis point hikes at the next couple of meetings, and Arone said it was a positive that Powell limited the half point hikes to two meetings.

The major averages were up sharply at around 3:15 p.m. ET, with the Dow up more than 700 points. The S&P 500 and Nasdaq are up more than 2% each.

Patti Domm

Wed, May 4 2022 3:15 PM EDT

We’re very long away from neutral now and we’ll get there expeditiously, Powell says

Fred Imbert

Wed, May 4 2022 3:10 PM EDT

Strategist breaks down why stocks are rallying

Adam Crisafulli, founder of Vital Knowledge, broke down why stocks rallied during Powell's press conference.

"Stocks were excited about Powell refuting talk of 75bp increases and his (very modest) optimism about recent PCE trends, but his rhetoric about combating price increases was even more forceful than before," Crisafulli said.

— Yun Li

Wed, May 4 2022 3:10 PM EDT

Powell says Fed policies are 'famously blunt tools'

Fed Chair Jerome Powell said the central bank has a "good chance" to curb inflation without inducing a recession, but noted challenges in that endeavor.

"We don't have precision surgical tools. We have essentially interest rates, the balance sheet and forward guidance and they're ... famously blunt tools," Powell said at the press conference.

"No one thinks this will be easy. No one thinks it's straightforward. But there's certainly a plausible path to this," he added.

Hannah Miao

Wed, May 4 2022 3:09 PM EDT

Traders reduced bets for rate hikes this year

Traders are reducing thier expectations for Federal Reserve rate hikes this year.

Traders had been expecting a possible 75 basis point rate hike in June, but Fed Chairman Jerome Powell said that is not currently under consideration. The chairman also said the Fed could consider 50 basis point hikes at the next couple of meetings.

According to Wells Fargo's Michael Schumacher, fed funds futures were pricing in 52 basis points of hiking in June after Powell's comment, down from 61 basis points before the 2 p.m. ET Fed statement.

The futures market also shows traders reduced expectations for rate hikes this year. The futures market is now pricing in a fed funds rate of 2.80% at the end of the year, down from 2.96% before the Fed's statement.

The Fed announced it was raising the fed funds rate by a half percentage point and said it "remains highly attentive to inflation risks."

Patti Domm

Wed, May 4 2022 3:05 PM EDT

Powell emphasizes Fed policy works on demand, not supply

Fed Chair Jerome Powell reiterated the central bank's policy fights inflation through curbing demand, and cannot address supply side issues.

"Our tools don't really work on supply shocks, our tools work on demand," Powell said at the post-policy meeting press conference.

The Fed chair also highlighted the war in Ukraine and Covid case surges in China as two geopolitical issues that could further exacerbate global supply chain disruptions.

"For both the situation in Ukraine and the situation in China, they're likely to both add to headline inflation," Powell said. "They're both capable of preventing further progress in supply chains ... or even making supply chains temporarily worse."

—Hannah Miao

Wed, May 4 2022 3:02 PM EDT

Powell says he's not 'actively considering' 75 basis point increase

Federal Reserve Chairman Jerome Powell said the central bank is not "actively considering" a 75 basis point increase.

"So a 75 basis point increase is not something that committee is actively considering," Powell said. "I think expectations are that we'll start to see inflation, you know, flattening out."

"It's a very difficult environment to try to give forward guidance 60, 90 days in advance, there's just so many things that can happen in the economy around the world. So, you know, we're leaving ourselves room to look at the data and make this decision as we get there."

— Sarah Min

Wed, May 4 2022 2:58 PM EDT

Powell: The labor market is 'extremely tight'

"The labor market has continued to strengthen and is extremely tight," according to Federal Reserve Chairman Jerome Powell.

The chairman noted that labor supply remains subdued even as labor demand gains strength. Employment rose by 1.7 million jobs over the first three months of the year, and the unemployment rate has dropped to a near five-decade low of 3.6%, according to the Fed chair.

The result is employers are having difficulties filling job openings and wages are rising at the fastest pace in many years, Powell said.

— Sarah Min

Wed, May 4 2022 2:58 PM EDT

Situation in Europe and China likely to add to headline inflation, Jerome Powell says

Fred Imbert

Wed, May 4 2022 2:54 PM EDT

Powell sees 'good chance' of a soft-landing for economy

Federal Reserve Chairman Jerome Powell said the central bank has a "good chance" of achieving a soft landing for the U.S. economy as it hikes rates to combat rising inflation.

"I would say I think we have a good chance to have a soft or softish landing, or outcome if you will," Powell said.

While maintaining a soft landing will be a challenge, Powell pointed to the resilient labor market, noting that households and businesses remain in "strong financial shape."

"It doesn't seem to be anywhere close to a downturn," Powell said. "Therefore, the economy is strong and is well-positioned to handle tighter monetary policy."

Samantha Subin

Wed, May 4 2022 2:49 PM EDT

Major averages rally after Powell rules out 75 basis point hike

The Dow, S&P 500 and Nasdaq jumped to their highs of the day after Fed Chairman Jerome Powell said the central bank wasn't considering a 75 basis point rate hike.

The Dow was up more than 400 points, or 1.5%. The S&P 500 traded 1.4% higher, and the Nasdaq advanced 1.2%.

Fred Imbert

Wed, May 4 2022 2:46 PM EDT

Powell says half point increases at next FOMC meetings are on the table

Fed Chairman Jerome Powell said Wednesday that, with the labor market being "extremely tight" and inflation "much too high," the Federal Open Market Committee could continue to raise the Fed Funds rate over the next few months.

"We are on a path to move our policy rate expeditiously to more normal levels," he said. "Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings."

He added that the committee also decided to begin the process of reducing its balance sheet, which will play an important role in forming the stance of monetary policy.

— Tanaya Macheel

Wed, May 4 2022 2:41 PM EDT

Powell: Fed is 'moving expeditiously' to bring down inflation

The Fed is "moving expeditiously" to combat rising inflation which has hard-hit consumers, said Chairman Jerome Powell to start the central bank's post-announcement news conference.

"Inflation is much too high and we understand the hardship it is causing, and we are moving expeditiously to bring it back down," he said. "We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses."

Powell added that the economy and country have "proved resilient" as they fight the conditions over the past two years and said that bringing down inflation is crucial to creating a "sustained period" of strong labor market conditions.

Samantha Subin

Wed, May 4 2022 2:38 PM EDT

Oil's surge adds to inflationary pressures

Federal Reserve Chairman Jerome Powell pointed to the rapid rise in commodity prices, prompted by Russia's war, as adding to inflationary pressures across the economy.

"The surge in prices of crude oil and other commodities that resulted from Russia's invasion of Ukraine is creating additional upward pressure on inflation," he said Wednesday.

West Texas Intermediate crude futures, the U.S. oil benchmark, traded around $107.51 per barrel Wednesday. The contract is up more than 40% this year, which has sent gas prices at the pump to record highs.

— Pippa Stevens

Wed, May 4 2022 2:37 PM EDT

Dow briefly erases gains as Powell kicks off news conference

The Dow Jones Industrial Average briefly turned negative on the day as Fed Chairman Jerome Powell started his news conference.

The 30-stock average was last up 64 points, or 0.2%. The S&P 500 hovered around the flatline, while the Nasdaq Composite was down 0.5% as of 2:36 p.m. ET.

Fred Imbert

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