Investors expect the Fed to raise rates soon.
(Photo: Reuters)
Frankfurt The Fed’s more aggressive approach to tightening US monetary policy has received positive feedback on New York stock exchanges. The Dow Jones standard value index rose 0.4 percent to 35,671 points on Wednesday after the statement by the US Federal Reserve. The broad S&P 500 gained 0.5 percent to 4,658 points. The technology-heavy Nasdaq advanced 0.6 percent to 16,004 positions. In the bond market, the yield on the relevant ten-year US government bonds rose slightly to 1.465 percent.
The Federal Reserve decided to wind down the security purchases used as a booster in the corona pandemic more quickly. The monthly rate of dismantling of acquisitions will be doubled from the last 15 billion to 30 billion dollars from mid-January. In March, this maneuver, known as tapering, would then be completed at the same speed, which would pave the way for an interest rate hike.
As the outlook of the monetary watchdog around Fed chair Jerome Powell shows, they consider three rate hikes upwards in the coming year to be appropriate. At the end of 2022, the interest rate would then be 0.9 percent. The key interest rate could then rise to 1.6 percent in 2023 and to 2.1 percent in 2024. For the time being, the monetary authorities left the key interest rate in the range of zero to 0.25 percent.
“Three increases mean an increase of 0.75 percentage points, significantly more than the market had expected,” said Naeem Aslam, chief market analyst at the brokerage house AvaTrade. “In the stock market, investors were hoping to see the aggressive side of the Fed. They like that the Fed is finally tackling inflation, which has gotten out of hand. “
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The Fed is facing the strongest inflationary pressures since the early 1980s. Consumer prices rose 6.8 percent in November. The rate of price increases has thus far exceeded the central bank’s target of 2.0 percent. In its now updated inflation forecast, the Fed assumes that the inflation rate will remain high at 2.6 percent in 2022.
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Chinese stocks listed on Wall Street came under selling pressure. According to the “Financial Times”, several technology companies are to be blacklisted by the US government because of their alleged involvement in the surveillance of the Uighur minority in China. Against this backdrop, the listed iShares fund (ETF) on Chinese stocks fell by almost four percent to a year and a half low of $ 61.71.
Eli Lilly: The shares of the pharmaceutical company rose 8.7 percent. Thanks in part to a government contract to supply corona drugs, Eli Lilly raised the profit target for 2021 to 8.15 to 8.20 from 7.95 to 8.05 dollars per share. The turnover will be 28 to 28.3 instead of 27.2 to 27.6 billion dollars. For 2022, the company was forecasting a surprisingly high surplus of $ 8.50 to $ 8.65 per share.
Vir Biotechnology: Encouraging test results for a coronavirus drug encourage investors to get started. The drug company’s shares rose more than ten percent on Wall Street. The preliminary data indicated that the drug could neutralize the Omikron variant and, unlike competing products, would not lose its effectiveness in the fight against this mutant, says analyst Phil Nadeau of asset manager Cowen.
United Parcel Service: The major Swiss bank UBS rated the delivery service’s share as a “top pick”. UPS is likely to benefit from rising consumer spending and has greater opportunities to expand margins than its competitors. UPS shares rose 1.5 percent.
Six flags: The amusement park operator’s shares rose 3.2 percent. The US bank Goldman Sachs had upgraded the share from “neutral” to “buy”, highlighting the robust ticket prices and the conservative forecast by Six Flags.
More: Twelve stocks that investors can use to invest in the future.