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S&P 500 TODAY
THE GIST (“THE WHAT”)
The S&P 500 index held steady ahead of the much awaited FOMC (Federal Open Market Committee) rate hike announcement, trading in a tight 4 point range and registering the day’s high at 2791.47. The index fell sharply after the Federal Reserve increased its benchmark overnight lending rate by a 25 basis point and signaled a fourth rate hike this year as inflation moved closer to the 2% threshold, coupled with the tightening labor conditions.
Losses were reversed alongside Jerome Powell’s news conference wherein he reiterated the importance of avoiding a policy error in times of rising inflation that could push the economy into an early recession. But the index pulled back during the last hour of the trading session, ending a choppy session near day’s lows at 2775.63, down 11.22 points and losing 0.40%.
THE DETAILS (The “How & Why”):
The interest rate hike decision weighed down on the broader index as 10 out of the 11 primary sectors ended the day lower. Telecommunication sector led the declines, losing 4.49%, led by a 6.20% loss in AT&T Inc. following a court ruling that gave a green light to the company’s $85 billion acquisition of Time Warner Inc. Other telecom companies, including 21st Century Fox Inc. and Walt Disney Co. however rose on the hope of further consolidation in the industry.
The 10-year Treasury yield spiked to the 3% mark for a brief moment alongside the rate hike announcement, but pulled back to settle at 2.975% for the day. Real Estate stocks lost 2.32% with rising mortgage rate concerns. While gains in Financials and Technology sectors limited losses in the early session, both sectors shed gains in a broad-based sell-off in the afternoon session, losing 0.33% and 0.23%.
H&R Block was a major drag on the index, losing 17.94% after reporting a disappointing revenue and margin guidance. Consumer Discretionary was the only sector ending the session with gains, up 0.13%.
On the economic data front, the Producer Price Index rose to a 6-year high of 3.1% in May, rising 0.5% y-o-y primarily due to soaring oil prices. Markets will now be keenly looking forward to parsing the ECB policy announcements expecting a rate hike tomorrow. The central bank is also expected to end its massive monthly bond-purchasing program.