Stocks bounce as investors increase rate hike expectations after Powell's comments

March 24, 2022: -On Tuesday, U.S. stocks rebounded as traders digested Federal Reserve Chair Jerome Powell’s latest rate hike comments.

The Dow Jones Industrial Average increased 254.47 points or 0.7% to 34,807.46. The S&P 500 added 1.1% to close at 4,511.61. The Nasdaq Composite rallied almost 2% to finish at 14,108.82.

On Monday, stocks were coming off a volatile session, as Powell said “inflation is much too high” and vowed to take “necessary steps” to curb inflation.

“The anticipation turned out to be worse than the actual event, and now the messaging that we heard yesterday sets us up to be prepared for the worst, but hope for the best,” Liz Young, head of the investment strategy at SoFi, told CNBC’s “Fast Money Halftime Report” on Tuesday.

Some market participants increased their expectations for rate hikes as Powell said the Fed could move the benchmark rate by a greater magnitude than previously forecast.

“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by over 25 basis points at a meeting or meetings, we will do so,” said Powell to the National Association for Business Economics. One basis point equals 0.01%.

At the May and June Fed meetings, Goldman Sachs upped its forecast to 50-basis-point hikes. In a note, Monday, UBS chief U.S. economist Jonathan Pingle said, “We think odds of a 50 bp rate hike are rising.”

The benchmark 10-year U.S. Treasury yield on Tuesday reached 2.392% at the highs of the session, its highest level since May 2019.

Bank stocks increase Tuesday along with interest rates. JPMorgan gained 2.1%, and Bank of America increased 3.1%.

Technology stocks, struggling Monday after Powell’s comments, rebounded Tuesday. Big Tech names Alphabet, Meta, and Amazon all gained more than 2%, which provides support to the indexes.

Nike shares moved up 2.2% after the retailer reported a beat on the top and bottom lines for its fiscal third quarter, buoyed by solid demand in North America.

Investors continued to watch the situation in Eastern Europe. President Joe Biden has said Russian President Vladimir Putin’s back is “against the wall” as the war with Ukraine nears a stalemate.

The three major averages are on the speed to finish the month positive. The S&P 500 is up 3.1% in March, while the Dow and Nasdaq are more than 2% higher.