US stocks rallied in late trading Wednesday, with Nasdaq leading the way after the Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point and comments by Chairman Jerome Powell reassured investors.
Powell said in a news conference following the Fed announcement that he did not believe the US economy is currently in a recession but it is softening.
He also said the lack of clear visibility into the future of the economy means the Fed can provide reliable guidance about where its policy is headed only on a "meeting-by-meeting" basis.
Market reacts to rate hike
"The willingness of Powell to let data guide them going forward was something that pleased the market. He didn't automatically say we needed another rate hike," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"It was a calming statement coming on the heels of a day where you saw some earnings and revenues that were better than expectations, albeit expectations that were very tempered."
The Fed action comes on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.
Stocks were already higher before the Fed announcement, with upbeat quarterly reports from Microsoft Corp and Alphabet Inc lifting sentiment about the earnings season.
The Dow Jones Industrial Average .DJI rose 444.14 points, or 1.4%, to 32,205.68; the S&P 500 .SPX gained 97.25 points, or 2.48%, to 4,018.3; and the Nasdaq Composite .IXIC added 442.17 points, or 3.82%, to 12,004.75.
Wednesday's hike was widely anticipated by investors.
"This was widely expected and encouraging that it was a unanimous decision," said Jack Ablin, chief investment officer and founding partner at Cresset Capital. "It was well telegraphed and properly balanced against expectations."
Microsoft MSFT.O forecast double-digit growth in revenue this fiscal year on demand for cloud computing services. Alphabet Inc GOOGL.O reported better-than-expected sales of Google search ads, easing worries about a slowing ad market.
Advancing issues outnumbered declining ones on the NYSE by a 4.57-to-1 ratio.
The S&P 500 posted 11 new 52-week highs and 3,030 new lows; the Nasdaq Composite recorded 4,644 new highs and 10,095 new lows.