Stocks rose on Wednesday as investors awaited another likely interest rate hike from the Federal Reserve as it battles to bring soaring inflation under control.
The Dow Jones Industrial Average gained 220 points, or 0.71%. The S&P 500 climbed 0.65% and the Nasdaq Composite added 0.39%.
The central bank is expected to issue its third straight rate hike of 0.75 percentage points on Wednesday. A higher-than-expected consumer price index in August and hawkish comments about rate hikes from Fed leaders weighed on stocks, with more pressure likely as the central bank continues its battle.
Investors will be watching the central bank’s longer-term projections, paying particular attention to the final federal funds rate last forecast in June to hit 3.8% in 2023. Some economists, however, expect the Fed raises this forecast to above 4%.
Chairman Jerome Powell’s prediction and comments should offer further insight into rising interest rates and the impact this could have on economic growth.
“Our sense is that markets could be set up for a short-lived rally if the Fed hikes +75bps and Powell doesn’t escalate his hawkish rhetoric even further,” Wolfe Research’s Chris Senyek wrote in a note to customers. “That said, we don’t expect to have to change our bearish call in the medium term.”
General Mills shares gained more than 4% as they raised their outlook for the full year. Defense stocks and oil also surged when Russian President Vladimir Putin called for a partial military mobilization.
On the earnings front, results from Lennar, KB Homes and Steelcase are expected to be released on Wednesday. Existing home sales data is also due out Wednesday morning.
Treasury yields fell on Wednesday after hitting levels not seen in more than a decade.
Shares fell Tuesday at the start of the Federal Open Market Committee’s two-day policy meeting.