What's Next For Stocks After Fed Issues 0.5% Rate Hike, Raises 2023 Inflation Outlook?

Zinger Key Points
  • Economists expect the Federal Reserve will continue to raise interest rates in early 2023.
  • The Bureau of Economic Analysis releases its November Personal Consumption Expenditures Price Index reading on Friday, Dec. 23.

The SPDR S&P 500 ETF Trust SPY declined for the second consecutive week on concerns that Federal Reserve policy tightening will tip the U.S. economy into a recession.

On Wednesday, the Federal Open Market Committee voted unanimously to raise the fed funds interest rate by 0.5% to a new range of between 4.25% and 4.5%. The 0.5% rate hike marks a step down in tightening for the Fed following four consecutive 0.75% hikes, but economists expect the central bank will continue to raise interest rates in early 2023 in its ongoing battle against inflation.

Related Link: Higher Inflation, Slower Jobs Market Ahead: Explaining The Federal Reserve's Latest Decision To Raise Rates 0.5%

The FOMC rate hike came a day after the Labor Department reported the consumer price index gained 7.1% in November, down from a 7.7% increase in October and below economist estimates of 7.3% inflation. Core CPI inflation, which excludes volatile food and energy prices, was 6% in November, below economist estimates of 6.1%.

Related Link: CPI Data Leak? Traders Cry Foul Over Suspicious Market Action

On Monday, Sam Bankman-Fried, disgraced ex-CEO of bankrupt cryptocurrency exchange FTX, was arrested in the Bahamas and charged with several counts of conspiracy and fraud in the U.S. A Bahamas judge denied Bankman-Fried bail, and he is expected to be extradited to the U.S. for trial.

Tesla Inc TSLA CEO Elon Musk sold another $3.6 billion in stock this week, sending Tesla shares to their lowest level since November 2020. Tesla's stock price is now down more than 32% since Musk acquired social media platform Twitter for $44 billion in late October, and he is no longer the world's wealthiest person.

Power Trip: On Wednesday, Chinese online travel platform Trip.com Group Ltd TCOM reported third-quarter earnings and revenue numbers that exceeded analyst estimates, sending its stock price higher by 8% on the week.

In the week ahead, investors will get more quarterly reports from Nike Inc NKE, BlackBerry Ltd BB and FedEx Corporation FDX on Tuesday and Micron Technology Inc MU on Wednesday.

Excluding the energy sector, S&P 500 companies are on track to report a 1.6% earnings decline in 2022, according to FactSet.

Economic Numbers: Investors will get key economic updates in the week ahead on Friday, Dec. 23 when the Bureau of Economic Analysis releases its November Personal Consumption Expenditures Price Index reading and the U.S. Census Bureau releases its November New Home Sales report.

Photo via Shutterstock. 

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