The back of a man's head looking at a ASX sign

How do this morning’s stock market gains compare to Tuesday’s losses?

A few days ago, the US stock market saw massive falls over fears that the US Federal Reserve would raise interest rates and trigger a recession.

Today, it raised rates by three-quarters of a percentage point, with a target range for the key interest rate of 1.5% to 1.75%, which was exactly what investors feared.

But we didn’t see another dark day on Wall Street as a result of this news – in fact, the US Dow Jones stock index was up 1% at the close.

And when the Australian stock market opened this morning, it had risen more than 1% in the first hour of trading.

Why did the stock market rebound if rates rose?

Partly because they haven’t grown more than expected.

But also because, even if the next rate hike could be half or three quarters of a percentage point, Federal Reserve chief Jerome Powell suggested future rate hikes will not be as steep:

“Today’s 75 basis point increase is unusually large and I don’t expect moves of this magnitude to be common.”

So that would have given investors more confidence, which really fuels the stock market.

And because what happens in the US stock market impacts what happens on our stock exchange operator, the Australian Securities Exchange (ASX), local equities have also rallied.

Did this undo the ASX losses from earlier this week?

No.

On Thursday, the ASX200, which measures the performance of the Australian stock market based on the 200 best performing companies, fell despite morning gains.

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