Wall Street Rallies on Fed Rate Hike

Markets React to Fed Decision to Hike


U.S. stocks trimmed gains but remained in positive territory in afternoon trading on Wednesday, half an hour ahead of a widely anticipated interest rate hike by the Federal Reserve.

READ MORE: Fed Raises Interest Rates, Cites Ongoing US Economic Recovery

An increase in the Fed's benchmark rate, from near zero, would be the first since June 29, 2006. Traders see an 81.4 percent chance of a rate hike, according to the CME Group's FedWatch tool.

The U.S. central bank is expected to raise rates by a token 25 basis points, when it announces the outcome of its policy meeting at 2 p.m. ET (1900 GMT). Fed Chair Janet Yellen will hold a news conference by at 2:30 p.m. ET.



Higher interest rates make loans more expensive, crimping profit margins. Banks, however, will benefit.

Goldman Sachs was up 0.6 percent, while JPMorgan, Bank of America and Citigroup were up 0.4 percent.

The Fed has said it would raise rates when it saw a sustained recovery in the economy. While the unemployment rate has fallen to multi-year lows, inflation remains stuck below the Fed's 2 percent target.

"We expect the start of policy normalization to serve as a catalyst for normalization of the investment environment," said Mike O'Rourke, chief market strategist at Jones Trading.

Watch more coverage:

Yellen: Eyeing the Longer Term Economic Outlook


The prolonged period of extremely accommodative monetary policy has distorted investment objectives, he said in a note.

Advancing issues outnumbered decliners on the NYSE by 2,077 to 953. On the Nasdaq, 1,699 issues rose and 1,063 fell.

The S&P 500 index showed nine new 52-week highs and eight new lows, while the Nasdaq recorded 31 new highs and 75 new lows.

Watch more coverage:

The Confluence of Factors the Fed Considers

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Markets

DJIA 21,580.07 -31.71 -0.15%
NASDAQ 6,387.75 -2.25 -0.04%
S&P 500 2,472.54 -0.91 -0.04%
NIKKEI 225 20,099.75 -44.84 -0.22%
HANG SENG 26,706.09 -34.12 -0.13%
DAX 12,240.06 -207.19 -1.66%
USD (per EUR) 1.17 0.00 0.30%
USD (per CHF) 0.95 0.00 0.01%
JPY (per USD) 111.13 -0.75 -0.67%
GBP (per USD) 1.30 0.00 0.23%

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