The Dow Jones Industrial Average closed up 0.23% after a bout of choppy trading late in the day. The S&P 500 trimmed earlier gains to end up 0.3%, and the Nasdaq Composite jumped 1%. The gains helped MSCI’s main world share index to rise 0.54%.
Stephen Innes, a managing partner at SPI Asset Management, said investors are betting that despite the Fed’s vows to tame inflation, there is a chance “the Fed loses its nerve and downshifts anyway.”In line with more modest rate expectations, the 2-year yield, which rises with traders’ expectations of the Fed fund rates, retreated to 3.8267% compared with Wednesday’s close of 3.981%. The yield on benchmark 10-year Treasury notes also fell to 3.4173% compared with 3.5% the previous day.
In Europe, news of the rate hikes in Switzerland and Britain helped push the European-wide STOXX 600 share index down 0.21%. The banking sector was again a drag, with the index of top European banks down 2.53%. Investor bets of a more dovish Fed put the dollar on the back foot, with the dollar index flat after hitting a seven-week low earlier in the session. The pound barely budged, having already added to its near 5% rally over the last fortnight with a 0.22% rise to $1.22969.
John Leiper, Titan Asset Management’s chief investment officer, said the BoE’s hike came as no surprise following Wednesday’s painful inflation data.Fed chief Jerome Powell had said that, while inflation remained a problem, the current stresses in the banking sector could have a significant impact on the US economy, thereby reducing the need for rate rises.