Shares rose on Wednesday as investors waited for another likely rate hike from the Federal Reserve, which is fighting to contain soaring inflation.
The Dow Jones Industrial Average gained 148 points, or 0.5%. The S&P 500 climbed 0.66% and the Nasdaq Composite rose 0.63%.
“It’s the calm before the storm — a little oversold here ahead of the obviously extremely important Fed meeting, but very low volume,” said Ryan Detrick, chief market strategist at the Carson Group. “We know things can turn on a dime, but there is a brief optimism for the Fed.”
The central bank is expected to release its third consecutive interest rate hike of 0.75 percentage point. A higher-than-expected reading of the consumer price index in August and aggressive comments about rate hikes from Fed leaders weighed on equities, with likely more pressure ahead as the central bank continues its battle.
Investors will follow the central bank’s long-term forecastspay close by attention to the rate of the terminal fed funds’ last estimated in June at 3.8% in 2023. However, some economists expect the Fed to increase that forecast above 4%. The final interest rate is the level at which the central bank will take rates before they stop tightening.
The forecast — and comments from Chairman Jerome Powell — should provide more insight into how much more interest rates could rise and how that could affect economic growth.
The S&P 500 is down more than 8% in the past month, giving up most of a summer swing as traders begin to fear the Fed will raise interest rates too far and send the economy into recession. The benchmark is close to the week leading up to Wednesday’s decision.