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 140 points, or 0.47%. The S&P 500 climbed 0.47%, and the Nasdaq Composite added 0.25%.
As stocks rose, the yield on the 2-year Treasury note topped 4% for the first time since October 2007, a sign that the Fed may need to hike rates even more aggressively ahead.
“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 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.
In other news, General Mills’ stock gained more as it upped its full-year outlook. Defense stocks also rose as Russian President Vladimir Putin called for a partial military mobilization.
On the earnings front, results from Lennar, KB Homes, and Steelcase are slated for release after the bell. Existing home sales data showed a decline over July.
Stocks fell Tuesday as the Federal Open Market Committee’s two-day policy meeting began.
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