U.S. stocks rally after Fed rate hike

STORY: "I do not think the U.S. is currently in a recession."

The U.S. Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point on Wednesday in its fight against record-high inflation, a widely expected move that strengthened a stock market rally and reassured investors in no mood for surprises.

The Dow gained more than a percent and a third. The S&P 500 ended more than two and a half percent higher, while the Nasdaq surged 4%.

Comments from Fed Chairman Jerome Powell further fueled the stock market rally, after he said the U.S. central bank would likely need to slow the pace of rate increases at some point.

"As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation."

George Cipolloni is portfolio manager at Penn Mutual Asset Management.

“They (The Fed) should step down. I think this expectation was either 75 or 100. They did 75. The next one, depending on what the data shows, will probably be similar, maybe, you know, above 25 basis-points. And then, yes, I expect we should step down to the 25, the normal 25 basis point moves”

The news from the Fed added to gains from upbeat quarterly reports from Microsoft and Google-parent Alphabet, which rose more than six and seven percent, respectively.

Microsoft said it expected double-digit revenue growth this fiscal year, while Alphabet reported better-than-expected sales of Google search ads, easing worries about a slowing advertising market.

That boosted shares of other mega-cap stocks, including Apple, Amazon, Tesla and Meta Platforms. But after the close, the Facebook owner issued a gloomy forecast after recording its first ever quarterly drop in revenue, sending shares in the other direction in extended trading.