Stocks hold onto gains during volatile post-Fed session

Stocks finished Thursday’s trading session higher during a volatile session that followed the Federal Reserve’s signal on Wednesday that the central bank’s rate hiking campaign may be nearing an end amid concerns about stability in the global banking system.

At the closing bell on Thursday the S&P 500 (^GSPC) was up 0.3%, the Dow Jones Industrial Average (^DJI) higher by 0.2%, and the technology-heavy Nasdaq Composite (^IXIC) was higher by 1%. Earlier in the session, all three major averages had been higher by more than 1% with the Nasdaq up more than 2%, and in afternoon trade both the S&P and Dow tipped into red figures.

Bank stocks remained a source of pressure on Thursday, with the KBW Regional Bank Index (^KRX) falling nearly 3% with regional banks including First Republic (FRC), KeyCorp (KEY), and Comerica (CMA) all falling more than 6%.

Crude oil was under pressure on Tuesday with WTI crude falling more than 2% to as low as $69.20 per barrel after trading closer to $71 earlier in the day. This puts oil back near its lowest levels since November 2021.

The 10-year Treasury yield also came in a bit Thursday, falling nine basis point to settle near 3.40% and continuing a move lower in yields started Wednesday following the Fed’s latest economic forecasts suggested rate hikes are closer to ending than previously expected.

On Wednesday, the Fed raised the target range for its benchmark interest rate by 0.25% as expected, bringing the range for the fed funds rate to 4.75%-5%, the highest since October 2007.

Updated economic projections from the Fed, however, suggested only one more 0.25% rate hike is likely this year, a forecast that is in-line with what the central bank said in December but a reversal from Fed Chair Jay Powell’s signaling earlier this month that rates would likely need to go “higher than previously anticipated.”

“The outcome of the March Federal Open Market Committee (FOMC) meeting was broadly as we expected,” wrote Bank of America economists led by Michael Gapen. “That said, the Fed has taken on board some amount of tightening in credit standards and terms as a result of the recent stresses that emerged from several regional banks.”

Speaking in a press conference following Wednesday’s policy announcement, Powell said some of these tighter financial conditions would have the “same effect” as raising interest rates. As a result, Powell said several Fed officials were including the bank crisis and financial market fallout in their forecast for fewer rate hikes over the balance of this year.

“Powell stuck with the Fed’s narrative that there is still a path toward a soft-landing or returning inflation to target without pushing the economy into a recession,” wrote Ryan Sweet, Chief U.S. economist at Oxford Economics, in a note on Wednesday. “However, that path has become narrower because of the pressure on the banking system.”

Away from the index-level reaction to Wednesday’s Fed news, several big tickers related to the crypto industry were on the move after news since Wednesday’s close.

Coinbase (COIN) stock fell 14% on Thursday after the company disclosed late Wednesday it received a Wells Notice from the SEC, which warns companies of pending action from the regulator. Shares of Coinbase fell as much as 18% earlier in the session.

Shares of Block (SQ), the payments company formerly known as Square, were also under pressure Thursday, falling 14.8% after short-seller Hindenburg Research released a new report on the company which alleged up to 75% of the company’s accounts were in some form fraudulent or second accounts from existing users.

In a statement on Thursday afternoon, Block called Hindenburg’s report “factually inaccurate” and said it would work the SEC and explore legal actions it may take against the firm.

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