U.S. stocks soared Wednesday after the Federal Reserve approved its biggest interest-rate increase since 1994 but suggested moves of that scale would likely not become common.
In 4 p.m. trading, the S&P 500 was up 1.5%. The Dow Jones Industrial Average added 304 points, or 1%, to 30668.53, and the Nasdaq Composite rose 2.5%.
The Fed’s move is its latest effort to quell inflation through tighter monetary policy. Investors had largely expected the Fed to raise its short-term benchmark rate by 0.75 percentage point. What some had worried about heading into Wednesday’s interest-rate decision was that the Fed would have to raise interest rates at an even more aggressive pace to tamp down inflation.
At a press conference that followed the decision, Fed Chairman Jerome Powell said Wednesday’s move was “an unusually large one.” He added that he expected either a 0.50 percentage point or 0.75 percentage point increase at the Fed’s July meeting.
Ultimately, the guidance the Fed gives about the direction of interest rates Wednesday is more important for markets than the size of the rate increase, said Dorian Carrell, a fund manager at Schroders. Uncertainty about monetary policy has been a key driver of volatility this year, helping send the S&P 500 on Monday into bear-market territory, or a drop of at least 20% from a previous high.
“Markets are pricing in a Fed that’s trying to get in front of the curve rather than behind the curve on inflation,” said Art Hogan, chief market strategist at National Securities. That helped lift stocks heading into Wednesday’s rate decision, Mr. Hogan added.
Stocks rose broadly, with 10 of the S&P 500’s 11 sectors higher.
Read More: Interest Rates Raised 0.75 Percentage Point