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Wall Street: Growth stocks rise ahead of Fed's big rate decision

Wall Street: Growth stocks rise ahead of Fed's big rate decision

Investors have dramatically raised their bets that the Fed will raise rates by 75 basis points (bps) instead of 50 bps, a rapid swing in expectations that has triggered a violent selloff across world markets. 

Worries about surging inflation, higher borrowing costs and rising challenges to economic growth have walloped global equities this year. Worries about surging inflation, higher borrowing costs and rising challenges to economic growth have walloped global equities this year.

Wall Street's main indexes rose on gains in beaten-down growth and financial stocks on Wednesday even as investors braced for a bigger interest rate hike by the Federal Reserve to tame persistently high inflation.

The largest S&P sectoral gainers were consumer discretionary and communication services, while energy declined 0.7%.

Market heavyweights Tesla Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc added between 2% and 4.2%.

Investors have dramatically raised their bets that the Fed will raise rates by 75 basis points (bps) instead of 50 bps, a rapid swing in expectations that has triggered a violent selloff across world markets. 

With many high-profile Fed analysts, including those at JP Morgan and Goldman Sachs, now expecting a 75 bps rate hike by the Fed, investors have rushed to reprice their bets. Read full story

The U.S. central bank will release its statement at 2 p.m. ET (1800 GMT), with a press briefing by Fed Chair Jerome Powell expected at 2:30 p.m. ET.

"There's generally the view that even if the Fed moves 75 bps, it is largely priced in and that would explain why markets are performing well in advance," said Nicholas Brooks, head of economic and investment research at Intermediate Capital Group in London.

"After the decision, if the Fed's dot plot implies the terminal rate is below 4%, we could see stock indexes go a bit further, but if the rate is going to be higher than market expectations, the market will sell off very quickly."

Worries about surging inflation, higher borrowing costs and rising challenges to economic growth have rattled global equities this year.

At the start of the week, the benchmark S&P 500 marked a more than 20% decline from its record closing high on Jan. 3, confirming it has been in a bear market, according to a commonly used definition.

Meanwhile, U.S. retail sales unexpectedly fell 0.3% in May as motor vehicle purchases declined amid shortages and record high gasoline prices pulled spending away from other goods.

Economists polled by Reuters had predicted a 0.2% rise last month. Read full story

At 12:03 a.m. ET, the Dow Jones Industrial Average was up 192.52 points, or 0.63%, at 30,557.35, the S&P 500 was up 33.83 points, or 0.91%, at 3,769.31, and the Nasdaq Composite was up 202.01 points, or 1.87%, at 11,030.35.

Among individual stocks, Citigroup rose 3.3% to lead gains among the big banks, while Nucor Corp jumped 3% after it forecast upbeat current-quarter profit on strong steel demand.

Boeing Co surged 7.8% after China Southern Airlines Co Ltd conducted test flights with a 737 MAX plane for the first time since March, in a sign the jet's return in China could be nearing as demand rebounds. Read full story

Advancing issues outnumbered decliners by a 3.07-to-1 ratio on the NYSE and by a 3.31-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 31 new lows, while the Nasdaq recorded 10 new highs and 152 new lows.