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Wall Street stocks, oil prices rise after aggressive Fed hike outlook
US Treasury yields held just below three-year highs on Thursday and the closely-watched yield curve steepened, after earlier sitting at its flattest level in more than two years.
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Medical workers arrive before the opening bell at the New York Stock Exchange (NYSE) on May 26, 2020 at Wall Street in New York City. (AFP/Johannes EISELE )
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all Street stocks rebounded from early session losses on Thursday as investors weighed economic implications of the Federal Reserve's surprisingly aggressive interest rate stance, while oil prices surged on supply shortage concerns arising from the Russia-Ukraine conflict.
The Fed announced a quarter of a percentage point increase to near-zero interest rates on Wednesday, its first hike in nearly three years as it sought to combat soaring prices. The US central bank also projected six more similarly sized rate hikes this year, sparking worries among traders about the effect on economic growth.
US Treasury yields held just below three-year highs on Thursday and the closely-watched yield curve steepened, after earlier sitting at its flattest level in more than two years.
Benchmark 10- and 2-year yields were last at 2.1653 percent and 1.969 percent, respectively.
"The big surprise yesterday was the dot plot," said Thomas Hayes, chairman at Great Hill Capital in New York, referring to the Fed's interest rate projections.
"It was a dovish hike but a hawkish rhetoric and outlook. We believe that if they get anywhere near their projections they'd invert the yield curve and cause a guaranteed recession."
Read also: US Fed hikes interest rates
On Wall Street, the three main indexes reversed early losses, driven by the healthcare, consumer discretionary, technology, and financial sectors.
The Dow Jones Industrial Average rose 1.23 percent, to 34,480.76, the S&P 500 gained 1.23 percent to 4,411.67 and the Nasdaq Composite added 1.33 percent to 13,614.78.
"We had a relief rally yesterday and the market is digesting that today, consolidating a little bit and trying to get comfort with the reality versus expectations in terms of what the Fed is projecting," Hayes added.
European stocks also gained in choppy trading following the Fed rate hike and a similar move by the Bank of England.
The pan-European STOXX 600 index rose 0.45 percent, while MSCI's gauge of stocks across the globe gained 1.77 percent.
Read also: BI holds rate at 3.5% with eye on Ukraine crisis
Oil prices rose more than percent, continuing a series of wild daily swings, as the market rebounded from several days of losses on renewed focus on supply shortages in coming weeks due to sanctions on Russia.
Benchmark Brent crude futures settled 8.79 percent higher at $106.64 a barrel, its highest percentage gain since mid-2020.
US West Texas Intermediate (WTI) crude CLc1 rose 8.35 percent to $102.98 a barrel.
The dollar index, which measures the greenback's strength against six trading currencies, was last down 0.47 percent at 98.026.
Gold rose 1 percent as the US dollar and Treasury yields retreated. Spot gold XAU= added 0.7 percent to $1,942.04 an ounce, while US gold futures gained 1.62 percent to $1,939.00 an ounce.
