Wall Street swings after Fed hikes interest rate to battle inflation

NEW YORK: Wall Street whipsawed on Wednesday after the US Federal Reserve raised its key interest rate for the first time in over three years to fight stubbornly high inflation stemming from soaring crude oil prices during the US-Israeli war on Iran.

In its accompanying statement, the Fed said its decision was unanimous and more tightening is likely in the near future to effect a timelier drop in inflation.

"As widely expected, the Fed hiked interest rates for the first time in more than three years," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "After the hawkish comments from (Fed Chair Kevin) Warsh a couple of weeks ago in Jackson Hole, Wyoming, he kind of backed himself into the corner a little bit."

"The fact that it was unanimous is a tad surprising," Detrick added.

"At the same time, it really shows that the Fed is serious about combating the broadening inflation backdrop that we're seeing."

Investors will parse Warsh's comments at the press conference which is currently underway, for detail regarding the central bank's rationale behind today's decision and clues regarding the path forward for interest rates.

Earlier in the session, robust retail sales data suggested consumers were still spending despite an affordability squeeze due to rising prices, particularly at the petrol pump.

The war in the Middle East expanded as Saudi warplanes pounded Yemen while Iran-backed Houthi fighters launched drones and missiles at Saudi cities in a signal of Iran's extended reach in the widening conflict.

Even so, oil prices dipped after reports that Saudi Arabia was offering additional crude cargoes via Oman eased concerns about the scale of Middle East supply disruptions. Crude is up over 20 per cent in the last 2-1/2 weeks.

The three major US stock indices were gaining ground prior to the announcement, with a chips rebound, giving the tech-heavy Nasdaq the edge.

The Dow Jones Industrial Average fell 101.92 points, or 0.20 per cent, to 51,991.19, the S&P 500 gained 21.09 points, or 0.28 per cent, to 7,606.82 and the Nasdaq Composite gained 170.49 points, or 0.66 per cent, to 26,152.06.

Among the 11 major sectors of the S&P 500, technology shares led the gainers, while energy, weighed down by easing crude prices, suffered the largest percentage decline, 2.2 per cent.

Chevron and Exxon Mobil were down 2.3 per cent and 3.0 per cent, respectively, while Devon Energy and ConocoPhillips were off by more than 4 per cent each.

Tech was given a lift by semiconductor shares, which were up 1.1 per cent in their first decisive rally since a joint call from AI executives, which called for a slowdown of the rate at which capabilities are advanced and industry-wide safety coordination.

Robinhood shares dropped 5.3 per cent after the US Senate failed to advance sweeping cryptocurrency legislation in a major blow to digital asset companies.

Separately, the US Department of Justice on Tuesday charged two former Robinhood engineers with insider trading and misuse of confidential information.

Intel jumped 5.2 per cent after a report said South Korea's SK Hynix was in talks with the company about memory chip manufacturing in the United States. US-listed shares of SK Hynix were up 0.6 per cent.

IBM fell 3.5 per cent after the company said Anderon, its chip unit, has signed a funding agreement with the US government.

Advancing issues outnumbered decliners by a 1.42-to-1 ratio on the NYSE.

There were 64 new highs and 243 new lows on the NYSE.

On the Nasdaq, 2,556 stocks rose and 2,105 fell as advancing issues outnumbered decliners by a 1.21-to-1 ratio.

The S&P 500 posted 10 new 52-week highs and nine new lows while the Nasdaq Composite recorded 45 new highs and 201 new lows.