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S&P 500 bounces back as Fed Powell pours dovish waters over hawkish statement

  • US stocks rebound in the Fed aftermath, S&P500 is 1.5% in the green.
  • Ukraine/Russia peace talk hopes gain traction in global financial markets. 

The S&P 500 is in the green by some 1.6% at the time of writing and after the volatility surrounding the Federal Reserve that on Wednesday raised its benchmark lending rate for the first time since 2018, citing continued inflation pressures and saying the economic outlook remains "highly uncertain" amid the ongoing war between Russia and Ukraine.

By 19:40 GMT, the S&P 500 was ar 4,328 and had travelled between a low of 4,251.99 and a high of 4,347.06. The US central bank increased the federal funds rate to a range of 0.25% to 0.5% from its prior range of zero to 0.25%. This was in line with the market consensus. However, the statement and dots were more hawkish than expected which initially drive down prices on Wall Street.

"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures," the bank's Federal Open Market Committee said in a statement after its two-day meeting. The Fed statement noted that the Ukraine war could lead to higher inflation and slower Gross Domestic Product.

It also stated that most Fed officials see as many as seven rate increases in 2022. The Fed explained that the economic activity and employment indicators have continued to gain strength, jobs gains have been sold in recent months, and the unemployment rate has fallen notably.

"The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the FOMC said. "With appropriate firming in the stance of monetary policy, the committee expects inflation to return to its 2 percent objective and the labor market to remain strong," it added.

Separately,  the Fed’s dot plot is pencilling in rate hikes at every remaining meeting this year, pointing to a consensus funds rate of 1.9% by the end of this year. It sees three more increases in 2023 and then none the following year. 

The committee members also raised their inflation estimates, expecting the personal consumption expenditures price index excluding food and energy to reflect 4.1% growth in 2022, compared to December's 2.7% projection. Core PCE is expected to be 2.6% and 2.3%, respectively, in the next two years before settling to 2% over the longer term.

However, during the Fed chairman's presser, Jerome Powell said rate rises will depend on inflation and economic data. He has stated that the Fed is looking for the month on month inflation to come down, pouring dovish water on what was a more hawkish statement. This helped US stocks rebound ad fall back in line with the broader relief rallies pertaining to hopes of peace talks between Ukraine and Russia. 

Ukraine / Russia peace talk momentum shines 

Earlier in the day, Russia's foreign minister, Sergei Lavrov, said some formulations of agreements with Ukraine were close to being agreed upon. Moscow added that the two sides had been discussing status for Ukraine similar to that of Austria or Sweeden, meaning being members of the European Union but staying neutral and outside the NATO military alliance.

Ukraine's chief negotiator said it would give Kyiv binding international security guarantees to prevent future attacks. Ukrainian President Volodymyr Zelensky crosse the worse and explained that the peace talks between Russia and Ukraine were sounding more realistic. However, he added that more time was needed, as Russian airstrikes killed five people in the capital Kyiv and the refugee tally from Moscow's invasion reached 3 million.

SP 500

Overview
Today last price4326.31
Today Daily Change67.72
Today Daily Change %1.59
Today daily open4258.59
 
Trends
Daily SMA204298.17
Daily SMA504438.42
Daily SMA1004555.22
Daily SMA2004476.59
 
Levels
Previous Daily High4269.6
Previous Daily Low4136.82
Previous Weekly High4334.16
Previous Weekly Low4144.12
Previous Monthly High4592.23
Previous Monthly Low4105.11
Daily Fibonacci 38.2%4218.88
Daily Fibonacci 61.8%4187.54
Daily Pivot Point S14173.74
Daily Pivot Point S24088.89
Daily Pivot Point S34040.96
Daily Pivot Point R14306.52
Daily Pivot Point R24354.45
Daily Pivot Point R34439.3

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
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