Dow rises 100 points as Wall Street braces for Fed rate hike decision

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Stocks rose on Wednesday as investors awaited another likely interest rate hike from the Federal Reserve as it battles to bring soaring inflation under control.

The Dow Jones Industrial Average gained 148 points, or 0.5%. The S&P 500 climbed 0.66% and the Nasdaq Composite added 0.63%.

Short-term interest rates were soaring in anticipation of the Fed’s next massive hike, with the 2-year Treasury yield on Wednesday morning exceeding 4% for the first time since 2007.

“It’s a calm before the storm – a little oversold bounce here ahead of the obviously hugely important Fed meeting, but very light volume,” said Ryan Detrick, chief market strategist at Carson Group. “We know things can turn around in the blink of an eye, but there’s a brief optimism ahead of the Fed.”

The central bank is expected to issue its third straight rate hike of 0.75 percentage points on Wednesday. A higher-than-expected consumer price index in August and hawkish comments about rate hikes from Fed leaders weighed on stocks, with more pressure likely as the central bank continues its battle.

Investors will be watching the central bank’s longer-term projections, paying particular attention to the final federal funds rate last forecast in June to hit 3.8% in 2023. Some economists, however, expect the Fed raises this forecast to above 4%. The terminal rate is the level at which the central bank will take rates before it stops tightening.

The prediction – and comments from Chairman Jerome Powell – should offer further insight into rising interest rates and the impact that could have on economic growth.

General Mills stock hit a record high after its latest earnings report. Defense stocks also increased when Russian President Vladimir Putin called for partial military mobilization.

The S&P 500 is down more than 8% in the past month, giving up most of a summer rebound, as traders begin to fear the Fed will raise rates too much and tip the economy into a recession. The benchmark is stable for the week ahead of Wednesday’s decision.

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