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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"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.
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.
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.
-
Is Home Insurance Tax Deductible?With home insurance rates on the rise, you might be hoping to at least claim the cost as a tax deduction. Here's what you need to know ahead of tax season.
-
The December Jobs Report Is Out. Here's What It Means for the Next Fed MeetingThe December jobs report signaled a sluggish labor market, but it's not weak enough for the Fed to cut rates later this month.
-
Trump Signals Plan to Ban Institutional Investors From Buying Single-Family HomesThe president says the move could improve housing affordability. Here’s what the data shows about investor ownership, recent buying trends and what it could mean for homebuyers.
-
The December Jobs Report Is Out. Here's What It Means for the Next Fed Meeting
The December jobs report signaled a sluggish labor market, but it's not weak enough for the Fed to cut rates later this month.
-
Nasdaq Takes a Hit as the Tech Trade Falters: Stock Market TodayThe Dow Jones Industrial Average outperformed on strength in cyclical stocks.
-
Dow Hits New High Then Falls 466 Points: Stock Market TodayThe Nasdaq Composite, with a little help from tech's friends, rises to within 300 points of its own new all-time high.
-
Dow, S&P 500 Rise to New Closing Highs: Stock Market TodayWill President Donald Trump match his Monroe Doctrine gambit with a new Marshall Plan for Venezuela?
-
'Donroe Doctrine' Pumps Dow 594 Points: Stock Market TodayThe S&P 500 rallied but failed to turn the "Santa Claus Rally" indicator positive for 2026.
-
Stocks Struggle for Gains to Start 2026: Stock Market TodayIt's not quite the end of the world as we know it, but Warren Buffett is no longer the CEO of Berkshire Hathaway.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
Stocks End Volatile Year on a Down Note: Stock Market TodayAfter nearing bear-market territory in the spring, the main market indexes closed out the year with impressive gains.
