U.S. stocks are rallying on Monday following multiple days of losses. The Dow increased by over 1.5%, or 500 points, late this morning.
The S&P 500 also saw an increase of 1.2%. As well as this, the Nasdaq Composite, which focuses strongly on tech stocks, rose 0.7%. Over the past five days, the Dow witnessed continuous losses resulting in the longest losing streak since January. The main driver of the stock losses was the policy update by the Federal Reserve. This update showed that interest rates are due to increase in the coming years. The Fed is predicting an increase in 2023, whereas bank officials think the increase will happen as soon as next year. Higher interest rates are perceived as negative for stock prices due to higher borrowing costs for publicly traded companies.
“Given these extreme moves, one of the most important things this week will likely be Fed speakers responding to the meeting and subsequent market reaction,” said Jim Reid, a macro strategist at Deutsche Bank. “Make no mistake the market reaction was fairly extreme to what at the end of the day is a Fed that themselves suggest they are still around 2-1/4 years away from raising rates.”
The Dow Jones Industrial Average headed for its best day since March late Monday morning. The main gains were led by Goldman Sachs Group Inc., at 1.95% and UnitedHealth Group Inc., at 2.06%. However, cryptocurrency did not fare so well in today’s rally. Bitcoin experienced a dip of almost 5%, resulting in it dropping to its lowest level in two weeks. At one stage, Bitcoin was equal to almost $32,900.
The decrease in Bitcoin arose due to China cracking down further on cryptocurrency mining. Many Bitcoin mines in China were shuttered on Sunday due to authorities ordering a halt to crypto mining.