Stock Market Today

Stock Market Today: Stocks Soar as Fed Hikes Rates

The Fed raised its key interest rate as expected and projected several more rate increases this year.

Stocks started the day on solid footing, with the three major benchmarks all sporting gains of at least 1.5% in the lead-up to the Federal Open Market Committee's (FOMC) mid-afternoon policy announcement.

Trading got dicey in the immediate aftermath of the Fed's decision, though, with markets paring some of this earlier upside.

The central bank raised its key interest rate by 25 basis points – a basis point is one-one hundredth of a percentage point – or 0.25%, as widely expected, and forecast at least six additional rate hikes this year.

"Today's Fed meeting offered some level of clarity to investors in that they are no longer waiting to make significant steps to tighten current monetary policy," says Charlie Ripley, senior market strategist for Allianz Investment Management.

And the updated version of the Fed's economic projections and forecasts for policy rates "emphasizes an urgency coming from the Fed" and "a level of hawkishness" we have not seen for some time, Ripley adds.

Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

The major benchmarks quickly shook off this post-meeting dip to rally hard into the close. The Nasdaq Composite outpaced its peers, surging 3.8% to 13,436, as Chinese tech stocks like Pinduoduo (PDD, +56.1%) and Baidu (BIDU, +39.2%) bounced back after several days of sharp selling.

The S&P 500 Index (+2.2% at 4,357) and the Dow Jones Industrial Composite (+1.6% at 34,063) also finished the day with impressive gains. 

stock price chart 031622

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 surged 3.1% to 2,030.
  • U.S. crude futures fell for a third straight day, retreating 1.5% to settle at $95.04 per barrel.
  • Gold futures shed 1.1% to finish at $1,909.20 an ounce.
  • Bitcoin jumped 2.7% to $40,844.00. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • Starbucks (SBUX) gained 5.2% after Kevin Johnson announced he would step down as CEO after five years in the top spot. Johnson will be replaced on an interim basis by founder and former CEO Howard Schultz.
  • Micron Technology (MU, +9.0%) got a big boost after Bernstein analyst Mark Li upgraded the chipmaker to Outperform from Underperform (the equivalents of Buy and Sell, respectively), saying Russia's invasion of Ukraine will likely not be disruptive to the DRAM market. The analyst also expects DRAM prices to rise later this year.

Don't Fear the Fed

While Wall Street has collectively fretted over the expected resumption of rate hikes during the past few months, investors shouldn't automatically fear this shift in Fed policy.

"Investors need to remember that Fed rate hikes usually happen near the middle of the economic cycle, with potentially years left of gains in stocks and the economy," says Ryan Detrick, chief market strategist for LPL Financial. "In fact, a year after the first hike in a cycle has been fairly strong."

Specifically, across the six times the Fed has started a rate-hiking cycle between 1988 and 2015, the S&P 500 has averaged nearly 14% gains over the subsequent 12 months.

Still, investors looking to give themselves an even better chance of success in the current environment might look toward dividend-growth stocks. Their rising payouts help counter the effects of inflation and keep their yields more competitive with bonds … and better still, they historically outperform regardless of rates' direction.

Some investors prefer aggressive dividend growers – like these 14 stocks that have doubled their payouts of late – as they can be a way to rapidly improve your portfolio yield. Others, however, prefer a track record of reliability, which typically leads them to the ranks of the Dividend Aristocrats and their decades of dividend growth. But even within these 66 stocks are a number of cliques for investors looking to achieve different goals.

Today, we've highlighted five stocks for those looking for a little calm amid the market's choppy waters – in addition to dividend prowess, they also boast extremely low volatility compared to both the broader market and their Aristocrat peers.

Most Popular

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
5 Ways to Prepare for a Recession
recession

5 Ways to Prepare for a Recession

The signs seem to be pointing in one direction these days, so if you’re worried about being ready for a recession, consider taking these five measures…
June 28, 2022

Recommended

Stock Market Today (7/1/22): Stocks Catch a Second Wind to Start Second Half
Stock Market Today

Stock Market Today (7/1/22): Stocks Catch a Second Wind to Start Second Half

Despite a dour ISM manufacturing index reading Friday, stocks broadly managed to pull themselves together and finish well in the black.
July 1, 2022
Is the Stock Market Closed for the Fourth of July in 2022?
Markets

Is the Stock Market Closed for the Fourth of July in 2022?

Independence Day falls on a Monday in 2022, so the bond and stock markets will enjoy a long holiday weekend. Here's a look at the markets' holiday hou…
July 1, 2022
Stock Market Today (6/30/22): S&P Suffers Worst First Half Since 1970
Stock Market Today

Stock Market Today (6/30/22): S&P Suffers Worst First Half Since 1970

The major indexes produced a familiar result Thursday, finishing in the red to close out a dreary first six months of the year.
June 30, 2022
Can AI Beat the Market? 10 Stocks to Watch
stocks

Can AI Beat the Market? 10 Stocks to Watch

An artificial intelligence (AI) system identifying high-potential equities has been sharp in the past. Here are its 10 top stocks to watch over the ne…
June 30, 2022