Stocks close higher after Fed statement on interest rates

Global stock markets reacted positively to the monetary tightening announced by the Fed (Federal Reserve, the US central bank) on Wednesday (15).

On Wall Street, Nasdaq jumped 2.15%. The S&P 500 and Dow Jones indices advanced 1.63% and 1.08%, in that order.

With less force, the Brazilian Stock Exchange left stability to, in the last hours of the session, follow the upward movement abroad. The Ibovespa, a reference in the domestic market, rose 0.62% to 107,431 points.

The dollar rose 0.24%, to R$ 5.7080, renewing its highest quotation since April.

The performance of the Stock Exchanges contradicts the reaction expected by analysts to the confirmation that the Fed will increase the economy’s interest rates and accelerate the anticipation of the end of its bond-buying program, as the measures remove liquidity from the stock markets and favor the rise of the dollar.

This Wednesday’s stock market increases, however, can be explained by the details provided by the Fed chairman when announcing such measures. Jerome Powell has clearly pointed out that inflation is the main threat to the American economy, which is no longer at risk of being paralyzed by the emergence of variants of the Covid-19 virus.

“What’s really happening is that inflation has been higher for longer than expected and the Fed is recognizing that,” Esty Dwek, chief investment officer at Flow Bank, told the Wall Street Journal.

The analyst believes that companies and consumers have learned to deal with Covid and that, at the moment, the main concern is that the inflation generated by shortages will be reinforced by production stoppages in China, where the government wants to eliminate contamination.

The perception that it is better to fight inflation now, instead of waiting for a further deterioration of the scenario, helps to explain the behavior of the markets, according to Rafael Ribeiro, from Clear. “It was a hawkish statement [contracionista, no jargão do setor] of the Fed and that it should weigh more on the stock exchanges around the world”, he affirms.

Despite the Fed’s decision pointing to an aggressive monetary tightening, Powell’s comments hinted that this situation could last less than expected.

By pinpointing the breakdown of the supply chain as the cause of inflation, the US monetary authority alleviated investor concerns about a long-term price hike, according to Nicolas Borsoi, chief economist at Nova Futura.

Pointing out that the next steps of monetary policy will accompany the progress of the pandemic, Powell also signaled that the Fed will continue to be careful about the speed of withdrawal of stimulus, says Borsoi.

Investors were positioned for the worst in the stock market, according to Michael James, director of equity management at Wedbush Securities. “Today was about selling the expectation and buying the news,” he said.

Oil prices rose in line with other risky assets such as US equities, which responded positively to the Fed’s statement.

The barrel of Brent advanced 0.98%, to US$ 74.42 (R$ 427.95). The increase was also pressured by the reduction in stocks of the commodity in the US, with consumer demand reaching a record 23.2 million barrels per day.

The Minerva refrigerator soared 11.19%. The company is the main beneficiary of the resumption of Brazilian beef imports by China.

Significant increases also occurred in retail, with a highlight for the gain of 7.49%, by Magazine Luiza, and 7.46%, by Americanas.

with Reuters