The Federal Reserve has just ended its latest FOMC meeting, and the first such gathering under the stewardship of Jerome Powell, and voted to raise the federal funds rate target by 25 basis points. The move to the higher rate level had been widely expected, with nearly 95% of those on the Street expressing an opinion having suggested such a course was likely.
Moreover, the central bank also indicated that economic growth was picking up, as was inflation, and that it would likely increase interest rates another two times this year. The Fed suggested that it narrowly missed indicating that three more hikes would be forthcoming. However, it did raise the number of likely interest-rate increases in 2019 from two to three. Still further hikes were implied for 2020.
Importantly, Wall Street liked what it heard, as the Dow Jones Industrial Average, up some 130 points prior to the FOMC statement, quickly jumped another 100 points on the news. The financial stocks were the main beneficiaries of this move. All of the indexes sprinted to the day's highs just after the Fed announcement. The Street tends to like the Fed's greater transparency these days, so the positive reception was not a big surprise.
All told, we would expect the session to end with gains, although there could be some back-and-forth movement as the afternoon winds down in snowy New York City this afternoon. - Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.