Stocks spent most of Wednesday in clear territory, but went on a roller-coaster ride after the Federal Reserve, as probable, issued its third honest 75 basis point rate hike.
The Fed’s rate hike sparked plenty of chatter among Wall Street’s experts, with the main focus on what the central bank plans to do next. Today’s go brought the Fed’s target federal funds rate to between 3.0% and 3.25%, with projections from the 19 voting members of the Federal Open Market Group (FOMC) targeting a range of 4.25% and 4.5% by year’s end – a half-percentage point higher than where it was in June. Doing the math, that means rates need to rise another 1.25% over the central bank’s left over two meetings (in November and December).
“Today we heard and saw more of the same, and the market shouldn’t be too bowled over given the Fed and its officials telegraphed that more huge hikes were in the cards for the foreseeable future,” says Mike Loewengart, head of model choice construction at Morgan Stanley. “The market seems to have hoped beyond hope that they would hear some allusion to an end to rate hikes on the horizon, but that’s surely not what we got today.”
And that, in turn, sent the major market indexes moving quickly from green to red in the critical upshot of the Fed’s periodical. But, the wild ride wasn’t over, with stocks for the interim active back before eventually ending lower. At the close, the Dow Jones Manufacturing Average was down 1.7% at 30,183, the S&P 500 Index was off 1.7% at 3,789, and the Nasdaq Composite had shed 1.8% to 11,220.
Other news in the stock market today:
- The small-cap Russell 2000 gave back 1.4% to 1,762.
- U.S. crude futures fell 1.2% to end at $82.94 per barrel.
- Gold futures edged up 0.3% to $1,675.70 an ounce.
- Bitcoin barely budged, last seen at $19,002.41. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Stitch Fix (SFIX) was off nearly 7% at its session low after the online clothing seller reported return, but eventually swung to a 2.8% gain. In its fiscal fourth quarter, SFIX recorded a 16% year-over-year decline in revenue, a 9% drop in active clients and an in commission loss of $99 million, much wider than the $20.7 million loss incurred in the year-ago period. “While the company remains focused on the path back to profitability (sinking headcount, rationalizing trace, humanizing efficiencies, etc), we remain worried about the high supply levels which could take up again to impact SFIX’s flexibility, likely through the current fiscal year,” says UBS Global Investigate analyst Kunal Madhukar (Neutral). “Thus, while expectations are much lower now and the shares are trading at all-time lows, we reckon the nonstop uncertainty could keep investors on the sidelines until visibility improves.”
- General Mills (GIS) was another post-return winner, jumping 5.7% after its results. In its first quarter, the maker of Bisquick reported return of $1.11 per share on $4.7 billion in revenue, more than analysts were in the family way. The company also raised its full-year forecast amid expectations strong sales growth will offset macro-fiscal headwinds. “While the beat was largely anticipated by investors we speak with, few probable the company to raise guidance this early in the year,” says Goldman Sachs analyst Jason English. Still, the analyst maintained a Sell rating on GIS.
Use Bonus Stocks as Defense
With the Fed dodgy to cut rates soon, investors should take up again to be guilty with their portfolios. “Recent data have incorrigible the essential of the Fed’s tough stance,” says Gargi Chaudhuri, head of iShares investment approach. The Fed has “vigorously asserted its aim” on moving policy stance to a restrictive level to tame inflation, and the thought that the central bank “will raise rates and at once cut again in mid-2023 should now be place back into storage alongside the beach chairs,” she adds. As such, Chaudhuri believes investors should “spot defensively within equities given higher chances of an fiscal brake.”
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