Stocks rose Wednesday as investors awaited another likely interest rate hike from the Federal Reserve as it fights to tame surging inflation.
The Dow Jones Industrial Average gained 155 points, or 0.51%. The S&P 500 climbed 0.58%, and the Nasdaq Composite added 0.47%.
“It’s a calm before the storm — a little oversold bounce here ahead of the obviously extremely important Fed meeting, but very light volume,” said Ryan Detrick, chief market strategist at the Carson Group. “We know things can turn on a dime, but there’s some brief optimism ahead of the Fed.”
The central bank on Wednesday is expected to deliver its third consecutive 0.75 percentage point rate hike. A higher-than-expected consumer price index reading in August and hawkish comments on rate hikes from Fed leaders have weighed on stocks, with more pressure likely ahead as the central bank continues its battle.
Investors will be monitoring the central bank’s longer-term projections, paying close attention to the terminal fed funds’ rate last projected in June to hit 3.8% in 2023. Some economists, however, expect the Fed to raise that forecast above 4%. The terminal rate is the level where the central bank will take rates before it stops tightening.
The prediction — and comments from Chairman Jerome Powell — should offer further insight into how much more interest rates can go up and how that could impact economic growth.
The S&P 500 is down more than 8% in the past one month, giving up most of a summer bounce, as traders begin to fear the Fed will raise rates too far and tip the economy into a recession. The benchmark is flat for the week heading into Wednesday’s decision.