Photo: Arild Vagen / CC BY-SA 4.0
The Federal Reserve did what Wall Street expected on Wednesday, and two of its own policymakers voted that it was the wrong call. The central bank held its benchmark interest rate at 3.75% to 4%, but the 10-2 decision drew dissents from Governors Lisa Cook and Beth Hammack, who both wanted to raise rates by a quarter point instead, an unusual hawkish split at the Fed’s last meeting before the midterm elections. Stocks took the news in stride, closing modestly higher as investors shifted focus to a pair of heavyweight tech earnings reports due after the bell.
The Dow Jones Industrial Average rose 97.53 points, or 0.2%, to 52,475.10. The S&P 500 added 21.38 points, or 0.3%, to 7,743.98, and the Nasdaq Composite gained 72.04 points, or 0.3%, to 26,549.85. The Russell 2000 small-cap index rose about 0.3%, to roughly 2,828.
A hold that doesn’t feel like one. The Fed’s statement described an economy “expanding at a strong pace” with inflation still elevated, and Fed Chair Kevin Warsh was blunter at his press conference, telling reporters that “inflation is too high” and pointing to energy prices that have moved higher again in recent weeks, according to the Fed’s transcript. Warsh also said financial and credit conditions have tightened for some businesses and households since September, an acknowledgment that borrowing costs are already biting even without another rate increase.
What it means for borrowers and businesses. The 10-year Treasury yield climbed to about 5.04%, up from 4.99% on Tuesday, keeping pressure on mortgage rates, car loans and corporate borrowing costs. Rate-sensitive corners of the market felt it immediately: homebuilder D.R. Horton fell 2.7% and Lennar dropped 1.3%. Banks went the other way, since higher-for-longer rates fatten lending margins. Goldman Sachs rose 1.6% and JPMorgan Chase added 1.1%.
Chips carry the tape again. Semiconductor stocks did the heavy lifting for a fourth straight session, with the chip sector up about 2%. Broadcom rose 2.8% and CoreWeave jumped 7.3%. Boeing slipped another 0.6%, extending its slide a day after its worst drop in a year and a half.
Oil and the dollar. Oil prices rebounded, with U.S. crude settling up 2.9% at $102.78 a barrel, back above the $100 mark it broke below on Tuesday. The dollar index slipped 0.2%.
After the bell. The day’s real test comes tonight, when Microsoft, which closed down 0.1%, and Alphabet, up 1.3%, report quarterly results. Amazon follows Thursday evening, with Apple due early next week. Together the results will show whether the AI spending boom that has powered this market is still accelerating, and whether the Fed’s inflation worries have any company on corporate America’s side of the ledger.
JBizNews Desk | Wall Street
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