Wall Street stocks, oil prices rise after aggressive Fed hike outlook

The Fed announced a quarter of a percentage point increase to near-zero interest rates on Wednesday, its first hike in nearly three years as it sought to combat soaring prices. The U.S. central bank also projected six more similarly sized rate hikes this year, sparking worries among traders about the effect on economic growth.

U.S. Treasury yields held just below three-year highs on Thursday and the closely-watched yield curve steepened, after earlier sitting at its flattest level in more than two years.

Benchmark 10- and 2-year yields were last at 2.1653% and 1.969%, respectively.

“The big surprise yesterday was the dot plot,” said Thomas Hayes, chairman at Great Hill Capital in New York, referring to the Fed’s interest rate projections.

“It was a dovish hike but a hawkish rhetoric and outlook. We believe that if they get anywhere near their projections they’d invert the yield curve and cause a guaranteed recession.”

On Wall Street, the three main indexes reversed early losses, driven by the healthcare, consumer discretionary, technology, and financial sectors.

The Dow Jones Industrial Average rose 1.23%, to 34,480.76, the S&P 500 gained 1.23% to 4,411.67 and the Nasdaq Composite added 1.33% to 13,614.78.

“We had a relief rally yesterday and the market is digesting that today, consolidating a little bit and trying to get comfort with the reality versus expectations in terms of what the Fed is projecting,” Hayes added.

European stocks also gained in choppy trading following the Fed rate hike and a similar move by the Bank of England.

The pan-European STOXX 600 index rose 0.45%, while MSCI’s gauge of stocks across the globe gained 1.77%.

Oil prices rose more than 8%, continuing a series of wild daily swings, as the market rebounded from several days of losses on renewed focus on supply shortages in coming weeks due to sanctions on Russia.

Benchmark Brent crude futures settled 8.79% higher at $106.64 a barrel, its highest percentage gain since mid-2020.

U.S. West Texas Intermediate (WTI) crude rose 8.35% to $102.98 a barrel.

The dollar index, which measures the greenback’s strength against six trading currencies, was last down 0.47% at 98.026.

Gold rose 1% as the U.S. dollar and Treasury yields retreated. Spot gold added 0.7% to $1,942.04 an ounce, while U.S. gold futures gained 1.62% to $1,939.00 an ounce.