Stocks open higher as Fed rate call looms

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US stocks posted strong gains ahead of an announcement from the Federal Reserve that should provide more clarity on upcoming interest rate hikes, the prospect of which spooked markets this week.

The S&P 500 added 1.3% in early trading Wednesday. The broad index fell on Tuesday and has fallen on five of the past six trading days. The technology-focused Nasdaq Composite Index rose 1.8% at the open, while the Dow Jones Industrial Average gained 0.9%, or 300 points.

Stocks have been skewed in recent days by expectations that the Fed will embark on a series of rate hikes this year to temper rising inflation. The prospect of a shrinking balance sheet and higher rates has prompted some to sell risky assets, including shares of tech companies that promise future returns, and cryptocurrencies.

Economists expect the Fed to confirm expectations that it will start raising rates in March when it releases its statement at 2 p.m. ET. Interest rate futures traders are betting that the Fed will raise rates four or five times this year, according to CME Group.

Investors are also watching rising tensions between Russia and Ukraine that have caught the attention of NATO allies. Geopolitical turbulence has supported oil in recent days, pushing it to its highest level since 2014.

“Today the focus will be on the Fed,” said Luca Paolini, chief strategist at Pictet Asset Management. “It’s more about the tone of the press conference. People can expect that, given the market turmoil and geopolitical tensions, the Fed will tone down its rhetoric.

The VIX, a measure of expected volatility that is sometimes dubbed Wall Street’s fear gauge, fell 2.2 points to 29. The gauge climbed this week as stock markets fell.

Tech stocks led the stock gain on Wednesday.


Photo:

Ted Shaffrey/Associated Press

Mattel shares gained nearly 8.5% after the Wall Street Journal reported it had been awarded the license to produce Walt Disney-based toysit is

princess range and the “Frozen” franchise.

Earnings season continues, with Tesla and Intel due to report after markets close. Tesla shares added 3%.

In other stocks, shares of Texas Instruments gained 3.3% after the company posted an increase in revenue. Microsoft shares rose 4.7% after the software giant said its profits continued to grow as its cloud services business remained strong. AT&T shares rose 0.2% after the company turned a profit by improving its wireless revenue and shedding the burden of its pay-TV business losing customers in 2021.

In bond markets, the yield on the benchmark 10-year Treasury fell to 1.779% on Wednesday from 1.784% on Tuesday. Yields move inversely to prices.

Brent, the international oil benchmark, added 1.2% to $88.17 a barrel.

US government bond yields influence the cost of borrowing, from mortgages to student loans. WSJ explains how they work and why they are so crucial to the economy. Photo illustration: Tom Grillo/WSJ

Overseas, the pan-continental Stoxx Europe 600 index jumped 2%, with the largest gains in the travel and leisure sector. Stock indices in Asia closed mixed. China’s Shanghai Composite and Hong Kong’s Hang Seng gained 0.7% and 0.2% respectively. Japan’s Nikkei 225 and South Korea’s Kospi each fell 0.4%.

Bitcoin’s dollar value rose 4.2% from its level at 5 p.m. ET on Tuesday to $37,990.39. The world’s largest cryptocurrency by market value has recently faltered alongside broader markets, losing almost half of its value from its November peak.

—Hardika Singh contributed to this article.

Write to Caitlin Ostroff at [email protected]

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