NEW YORK (AP) — Stocks bounced around and bond yields snapped higher Wednesday after the Federal Reserve made its third big interest rate hike in a row and sharply increased its outlook for how high it expects to raise rates in coming months.
Treasury yields pushed further into multiyear highs after the central bank raised its short-term rate by three-quarters of a point. The Fed also said it now expects its benchmark rate to be a full percentage point higher by the end of the year than it had predicted in June.
The S&P 500 was up 0.5% after wavering between gains and losses as traders considered the impact of the Fed's update on interest rates, which have widespread effects on markets and the economy.
The Dow Jones Industrial Average was up 85 points, or 0.3%, as of 2:51 p.m. and the Nasdaq was up 0.7%.
The yield on the 2-year Treasury, which tends to follow expectations for Fed action, rose to 3.99% from 3.97% late Tuesday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.53% from 3.56% from late Tuesday.
The Fed is raising rates to fight the worst inflation in 40 years. The worry is that the Fed may cause a recession by slowing the economy too much.
"The markets are dancing to the Fed Funds Waltz, with the bond market leading the stock market," said Sam Stovall, chief investment strategist at CFRA.
The broader market has been lurching between gains and losses throughout the week as investors wait for the latest update on interest rates from the Federal Reserve. They will be watching closely as Fed Chair Jerome Powell discusses the central bank's views on the economy and the Fed's efforts to control the worst inflation in 40 years.
The Fed has been raising rates aggressively to try and tame high prices on everything from food to clothing.
The central bank's latest rate hike lifted its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level in 14 years, and up from zero at the start of the year.
The Fed's goal is to slow economic growth and cool inflation, but Wall Street is worried that it could hit the brakes too hard on an already slowing economy and cause a recession. Those concerns have been reinforced by reports showing that inflation remains stubbornly high and statements from Fed officials they will keep raising rates until they are sure inflation is coming under control.
Central banks worldwide are also dealing with inflation. The Bank of Japan began a two-day monetary policy meeting Wednesday, although analysts expect the central bank to stick to its easy monetary policy. Rate decisions from Norway, Switzerland and the Bank of England are next. Sweden surprised economists this week with a full-point hike.
Global tensions remain high as Russia's invasion of Ukraine continues. Russian-controlled regions of eastern and southern Ukraine have announced plans to start voting this week to become part of Russia. The war has killed thousands of people, driven up food prices worldwide and caused energy costs to soar.
Gasoline prices, which helped fuel inflation for months, have been generally falling. But, the average price for a gallon of gas went up for the first time in more than three months, rising to to $3.681 from $3.674, according to motor club AAA.
Several companies gained ground after giving investors encouraging financial updates. Cheerios maker General Mills rose 5.9% after raising its profit forecast for the year. CoverGirl owner Coty rose 4.2% following a solid revenue growth update and Walmart rose 1.6% after saying it will hire 40,000 U.S. workers for the holidays, a majority of them seasonal workers.
Cruise line operators slipped as Hurricane Fiona continued to batter the Caribbean. Carnival fell 4.2%.
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Yuri Kageyama and Matt Ott contributed to this report.
