Stocks bounced between positive and negative territory for most of Wednesday as investors anxiously awaited this afternoon's policy decision from the Federal Reserve.
But the major indexes made a beeline lower after the Fed increased interest rates by 0.25%, even as the central bank indicated that rate hikes could be coming to an end.
Most of Wall Street was anticipating a 25 basis point rate hike from the Fed, though recent turmoil in the financial sector following the collapse of several lenders, including Silicon Valley Bank, increased the chance the central bank would pause. However, Federal Reserve Chair Jerome Powell said in a subsequent press conference that "inflation remains too high," and that the central bank remains "strongly committed to bringing inflation down."
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Still, in its policy statement, the central bank said it "anticipates that some additional policy firming may be appropriate" in order to bring inflation down further, deviating from previous statements that mentioned "ongoing increases." This – in addition to an updated Summary of Economic Projections that targets a peak rate of 5% to 5.25% vs the current rate of 4.75% to 5% – suggests the central bank's rate-hike campaign will end sooner rather than later.
The latest Fed rate hike had plenty of Wall Street's top minds chiming in, including Jan Szilagyi, co-founder and CEO of AI-powered market analytics platform Toggle. "The Fed is still in an inflation-fighting mode and chose to use the window they have – a 25 bps would not be a big shock for markets – to ratchet up the rates at the slower pace compared to 2022," Szilagyi says. "Staying the course also signaled to the market that there isn’t something ominous the Fed knows that markets may not be aware of."
In single-stock news, GameStop (GME) soared 35.2% after the original meme stock and video game retailer unexpectedly swung to a profit in its fourth quarter. This follows seven straight quarters in which the company recorded a loss. GME also reported a decline in inventories, which reflects its "ongoing focus on maintaining a healthy inventory position, the company said in its press release.
Big moves like this are "the name of the game for GameStop," says David Wagner, portfolio manager at Aptus Capital Advisors. "Short interest has been a driver in this stock for quite some time and that will also be the case today. Luckily, this go around is not due to meme investors, but an actual tangible fundamental event."
As for the major indexes, the Nasdaq Composite slumped 1.6% to 11,669, the S&P 500 shed 1.7% to 3,936, and the Dow Jones Industrial Average gave back 1.6% to 32,030.
European Dividend Aristocrats
We often talk about the importance of income-paying investments in this space, mostly focusing on the S&P 500 Dividend Aristocrats. These are companies that have consistently raised their dividends annually for the last 25 years straight, and are widely considered to be the best dividend stocks around, at least when it comes to dividend growth.
But dividend royalty doesn't stop where the U.S. border ends – and international markets boast their own sets of the best dividend growth stocks too. Take the European Dividend Aristocrats, for example. While this group has somewhat different qualifications than their U.S. counterparts, they are known for a proven ability to provide stable and growing dividends over time – and should be on the radar of income investors.
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