Stocks rallied on Wednesday as investors reacted to the Federal Reserve's decision to raise interest rates by 0.75% and remarks from Chair Jerome Powell that signalled the central bank may slow the pace of its rate-hiking agenda. The Dow Jones Industrial Average rose over 400 points, while the S&P 500 Index and Nasdaq Composite jumped over 2.5% and 4%, respectively.
Here's how the market settled on Wednesday:
S&P 500 Index (NYSE: SPY): +2.62% or +102.56 points to 4,023.61
Dow Jones Industrial Average (NYSE: DIA): +1.37% or +436.05 points to 32,197.59
Nasdaq Composite Index (NASDAQ: QQQ): +4.06% or +469.85 points to 12,032.42
The Federal Open Market Committee (FOMC) issued another 75-basis-point rate hike to its benchmark interest rate on Wednesday at the conclusion of its two-day policy meeting. Powell said in remarks Wednesday afternoon that the central bank is could issue a third 0.75% rate hike after its FOMC meeting in September--economic data dependent--but it may slow the magnitude of rate hikes moving forward.
"As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation," Powell told reporters.
Wall Street was also encouraged by Powell's comments that he does not believe the U.S. economy is currently in a recession. Traders have been concerned this week that new GDP data slated for Thursday will show another quarter of contraction.
While a recession is commonly defined as two consecutive quarters of negative GDP readings, the National Bureau of Economic Research--which officially declares recessions--uses multiple factors including employment levels and real personal consumption expenditures to determine one.
Before the Fed's latest policy decision was released, stocks were boosted by gains from Google-parent Alphabet (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT) following earnings reports from the two tech giants late Tuesday.
Shares of Microsoft rose nearly 7% on Wednesday after the company issued a positive outlook for its cloud business. The company also maintained its revenue growth guidance for the new fiscal year, despite previously noted headwinds like changes in exchange rates, new COVID shutdowns in China and Russia's ongoing war with Ukraine.
Alphabet's stock climbed over 7.6% following the company's ad revenue beat in the wake of Snap's (NYSE: SNAP) warning that the currently macroeconomic climate is impacting digital advertising.
These reports helped bolster tech sentiment heading towards the end of the week, with Meta Platforms (NASDAQ: META) set to deliver results after closing bell on Wednesday, and Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) scheduled to report Thursday.
Elsewhere, pending home sales fell 20% year-over-year in June, according to the National Association of Realtors, making the slowest pace of contract signings on existing U.S. homes since September 2011 (excluding the first two months of COVID lockdowns). On a monthly basis, pending home sales declined by a wider-than-expected 8.6% last month.
"Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date," said Lawrence Yun, chief economist at NAR, in a statement. "There are indications that mortgage rates may to topping or very lose to a cyclical high in July. If so, pending contracts should also begin to stabilize."