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Stocks rise slightly as investors await Fed rate decision

It's time for the Fed to pause and listen to the market, says Judy Shelton

Stocks rose slightly Wednesday as investors awaited the Federal Reserve’s latest interest rate hike decision in its efforts to crush inflation.

The Dow Jones Industrial Average gained 65 points, or 0.19%. The S&P 500 added 0.25%, while the Nasdaq Composite climbed 0.25%.

Shares of Delta rose more than 2% after the airline said it expects 2023 earnings will roughly double because of “robust” travel demand.

The Fed will conclude its December meeting and is expected to deliver a 50 basis-point rate hike. That’s a smaller bump after four consecutive 75 basis point hikes. A basis point is equal to one-hundredth of one percent.

Chair Jerome Powell will also speak Wednesday, giving further clues about what’s coming from the Fed in 2023. In previous meetings this year, traders have been sensitive to Powell’s language, interpreting his tone as hawkish or dovish.

“While we expect the Fed to slow the pace of rate rises at its Wednesday meeting, policymakers are likely to stress that the job of curbing inflation is not yet over,” UBS’ Mark Haefele wrote in a Wednesday note. “A slowing of job creation and wage growth will be needed before the Fed can stop hiking.”

Stocks are coming off a winning session, fueled by a cooler-than-anticipated inflation report. The November consumer price index was 7.1% on the year, less than the 7.3% gain expected by economists surveyed by Dow Jones. The 0.1% increase from the previous month was also less than forecast.

The signal that inflation may have peaked was positive for stocks as it means the Fed may be one step closer to halting interest rate hikes or switching to cuts, which would fuel equities.

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