Stocks are bouncing back Wednesday, rallying as Fed Chairman Jay Powell said another hike of75 basis pointsis possible in July.
The Nasdaq (COMP.IND)+3.12%, S&P 500 (SP500)+2.15%and Dow (DJI),+1.51%, are solidly higher after struggling to hold gains going into Powell'spress conference.
Rates are moving back around lows. The 10-year Treasury yield is down 10 basis points to 3.38% and the 2-year is down 11 basis points to 3.33%. Both had been down more than 10 basis points before the decision.
Powell said that hikes of 75 basis points would not be "common," but that the FOMC was looking at a choice between 75 and 50 in July, which would bring rates to a "more normal range" and give the Fed more flexibility.
Fed watchers also took notice when he said the Fed was "determined" to keep inflation expectations around 2%.
The ramp up in the Fed's dot plot of economic expectations may have worried equity investors. The year-end median expecation for the fed funds rate shot up to 3.4% and 3.8% in 2023.
That would require hikes of 50 basis points through the rest of the year.
Projections also have inflation coming down to 5.2% by the end of 2022.
"We have never had a period where inflation has come down by more than 2% without having a recession," Guggenheim's Scott Minderd said on Bloomberg TV. "So if those numbers are real and that's what's going to happen, we are destined for a recession."
Earlier, stock rose after major European indexes popped as the ECB called an emergency policy meeting where the central bank instructed staff to create a new tool to address yield fragmentation.
"Not exactly a bazooka," economics lecturer Daniel McLaughlin tweeted. "The ECB called an emergency meeting this AM, so explicitly acknowledging that fragmentation is already there in the EA, and said it would reinvest the PEPP flexibly (as it said it could last week) and has set up committees to come up with something else."
Before the bell the market digested weak May retail sales numbers. Sales fell 0.3%, compared with forecasts for a rise of 0.1%, while April's figure was revised down.
The retail control group, which goes into GDP calculations, was flat.
The "factors that have sustained spending thus far are getting near the end of their rope, and we are increasingly concerned that goods spending will slow sharply and that will be particularly evident in retail sales which is mostly a measure of goods spending," Wells Fargo said.
Among active stocks, Netflix is the biggest S&P gainer after betting a vote of confidence on ad revenue from Cowen.