The bond market experienced volatility on Wednesday, while U.S. equities saw modest gains following the inflation, could also pose risks to economic growth.
The S&P 500 climbed 0.3% after fluctuating between narrow gains and losses throughout the session, both preceding and following the Fed’s announcement. The Dow Jones Industrial Average gained 97 points, or 0.2%, and the Nasdaq composite increased by 0.3%.
Trading was more pronounced in the bond market, where the yield on the two-year Treasury initially rose after the Fed confirmed it would hold the federal funds rate steady. The yield climbed to over 4.79% from 4.70% late Tuesday, following news that two officials had favored a rate hike but were outvoted by their colleagues.
The central bank had increased its primary interest rate last month for the first time in three years, aiming to combat inflation that has remained above the Fed’s 2% target for an extended period, causing widespread frustration among Americans.
However, the two-year Treasury yield, which serves as a barometer for Fed policy expectations, quickly reversed its trajectory. It fell to as low as 4.69% after Fed Chairman Kevin Warsh stated that the central bank preferred to observe how economic conditions evolve before taking further action.
He noted that borrowing costs have risen and that investors and lenders have become “more discerning.” He said the overwhelming judgment among Fed officials at their meeting was that “monetary medicine” is “starting to work some.”
Along with signals that the U.S. economy continues to grow, Warsh said that “broadly, these developments go in the direction” of helping the Fed achieve its two goals of a healthy job market and relatively low inflation.
Wall Street traders still anticipate further rate increases, though they have reduced their expectations regarding the frequency of such hikes by next summer, according to data from CME Group.
The yield on the 10-year Treasury, which reflects expectations for future inflation and economic growth, saw some volatility following the Fed meeting but remained largely stable, rising to 5.02% from 4.99% late Tuesday.
Yields also received upward pressure from rising oil prices amid ongoing uncertainty regarding the Middle East and the global energy sector. The price of a barrel of Brent crude, the international benchmark, rose 2% to $111.64.
Higher <a expectations for the summer.
GE HealthCare Technologies rose 6.6% after reporting summer profit and revenue that surpassed analyst estimates. The company also increased its full-year guidance for revenue growth and other financial metrics.
Etsy gained 5.4% after its quarterly profit significantly outperformed analyst forecasts. CEO Kruti Patel Goyal noted that the online marketplace experienced year-over-year growth in active buyers for the first time in two years, while its active seller base expanded at its fastest pace in two years.
Artificial intelligence stocks also remained relatively stable. These shares have steadied this week following significant volatility driven by concerns that high borrowing costs might hinder the expansion of AI data centers, which are largely funded by debt.
AI-related stocks received a boost after South Korea’s SK Hynix surged 10.9% in Seoul following its latest earnings report. The memory chip manufacturer stated it is experiencing a virtuous cycle of increased AI adoption and expects demand to continue outstripping supply through 2030.
On Wall Street, Micron Technology, which also produces computer memory, rose 5.9% and served as a primary driver for the S&P 500.
Outside of the technology sector, Wendy’s jumped 15.1% following a buyout offer from Trian Fund Management, led by investor Nelson Peltz.
These gains helped mitigate a 5.8% decline for Boston Scientific. Although the medical device manufacturer reported a smaller profit decline than analysts had anticipated for the quarter, its profit forecast for the current quarter fell short of expectations.
Robinhood Markets dropped 3.3% after reporting quarterly profit and revenue that missed analyst projections.
In international markets, South Korea’s Kospi surged 6.6% following the rally in SK Hynix. Japan’s Nikkei 225 rose 1.1%, while France’s CAC 40 declined by less than 0.1%.
