Dow advances for 13th session to log longest winning streak since 1987 after Fed raises rates to 22-year high

How stocks traded

• The Dow Jones Industrial Average
  DJIA,
  +0.23%
  gained 82.05 points, or 0.2%, to end at 35,520.12. The blue-chip gauge Wednesday extended its winning streak to a 13th session, booking its longest winning streak since 1987, according to Dow Jones Market Data.

• The S&P 500
  SPX,
  -0.02%
  was off 0.71 points, leaving it nearly flat at 4,566.75

• The Nasdaq Composite
  COMP,
  -0.12%
  dropped 17.27 points, or 0.1%, to finish at 14,127.28.

On Tuesday, the Dow Jones Industrial Average rose 27 points, or 0.08%, to 35, 438, the S&P 500 increased 13 points, or 0.28%, to 4,567, and the Nasdaq Composite gained 86 points, or 0.61%, to 14,145.

What drove markets

The three major stock indexes finished a volatile trading session mostly higher on Wednesday, after wavering between gains and losses following the Federal Reserve’s interest rate decision at 2 p.m. Eastern time.

The Fed raised its benchmark interest rate by a quarter-point to a range of 5.25%-5.5%, the highest level in 22 years, as was widely expected. The central bank also left the door open to more rate hikes later this year, with policymakers signaling a willingness to do more to bring elevated inflation down to a 2% yearly target.

The Fed’s policy statement indicated that more work may be still needed on interest rates to get inflation back down to 2%. In a statement, the Fed said that it remained “highly attentive” to inflation risks, and the committee will “continue to assess additional information and its implications for monetary policy.”

The statement also kept language saying that the central bank would look at upcoming economic data, the cumulative monetary tightening to date, and the lags with which interest-rate policy affects the economy “in determining the extend of additional policy firming that may be appropriate.”

MarketWatch live coverage: Fed meeting: Dow ticks higher as Powell says future hikes depend on economic data

“We remain committed to bringing inflation back to our 2% goal,” Chair Jerome Powell said in a press conference after the Fed rate hike. “No one should doubt that.”

He also said that the central bank would be “going meeting by meeting” in making decisions about future interest-rate increases.

“It is certainly possible that we would raise” in September, Powell said. “I would say it is possible we could raise [rates] at the September meeting if the data warranted and it possible we would choose to hold steady at that meeting.”

Futures markets are pricing in a 29% chance of an additional hike this year after Wednesday’s meeting while also pricing in the first full rate cut for July 2024, according to CME FedWatch Tool.

See: Here’s how stocks, bonds and the dollar have traded on every Fed Day over the past year

“Paradoxically, today’s Fed meeting was one of the most certain and uncertain of the cycle,” said Gurpreet Gill, global fixed income macro strategist at Goldman Sachs Asset Management. “However, investors remain divided on whether this marks the last increase in the current tightening campaign.”

“We think recent data is consistent with the U.S. policy rate peaking in July, as core CPI inflation slowed sharply in June. But any renewed signs of inflation strength in key data like the Employment Cost Index released on Friday and upcoming PCE inflation releases still have potential to extend the hiking path,” she said in emailed comments on Wednesday.

Robert Armstrong, investment strategist at Schroders, told MarketWatch that Chair Powell and other FOMC members had to be “laser-focused” to make sure they don’t repeat the mistakes of the Arthur F. Burns regime, when in the 1970s the Fed eased up on interest rates too soon, so inflation came roaring back out of control. “That’s why Powell is very careful with his language at the press conference today,” Armstrong said via phone.

Meanwhile, investors on Wednesday were digesting more corporate earnings.

Shares in tech behemoths Microsoft
MSFT,
-3.76%
and Alphabet
GOOG,
+5.59%
went in opposite directions, following their results and guidance late on Tuesday.

Traders were in the middle of a week in which about 170 companies from the S&P 500, representing roughly 40% of the benchmark’s market capitalization, will report their earnings.

The results of AT&T
T,
+0.61%,
Boeing
BA,
+8.72%,
Coca-Cola
KO,
+1.29%
and General Dynamics
GD,
+2.19%
were also published early Wednesday, while Meta Platforms
META,
+1.39%,
Lam Research
LRCX,
-1.21%
and eBay
EBAY,
+1.01%
will feature after the close.

In U.S. economic data, U.S. new home sales fell 2.5% to an annual rate of 697,000 in June, from a revised 715,000 in the prior month, the Commerce Department reported Wednesday. 

Companies in focus

• Alphabet Inc.
  GOOG,
  +5.59%

  GOOGL,
  +5.78%
  stock ended 5.8% higher Wednesday after the Google parent topped Wall Street profit and sales estimates on strong advertising sales.

• Microsoft Corp.‘s
  MSFT,
  -3.76%
  was down 3.8% after management said the process of generating revenue from AI use cases would be gradual.

• Snap Inc.
  SNAP,
  -14.23%
  tanked 14.2% after the social-media company forecast worse-than-expected sales for its current quarter.

• Boeing Co. 
  BA,
  +8.72%
  jumped 8.7% toward an 18-month high after the aerospace and defense giant reported big second-quarter revenue and free cash flow beats, amid strength in its commercial airplanes business.

• Texas Instruments Inc.
  TXN,
  -5.42%
  dropped 5.4% after the chip maker’s forecast came in lower than expected as it continues building out capacity amid rising inventory.

• Wells Fargo & Co.
  WFC,
  +2.11%
   rose 2.1% after the bank said its board approved a new share buyback program of up to $30 billion and a dividend increase.

• PacWest Bancorp
  PACW,
  +26.92%
  rocketed 26.9% as the Banc of California
  BANC,
  +0.62%
  confirmed plans to buy the troubled regional lender.

— Jamie Chisholm contributed