U.S. stocks closed higher on Wednesday after the Fed said it would double the tapering of its stimulus and signaled three rate rises in 2022.
Markets were expecting a hawkish tone to today's statement, with bets on an accelerated timeline for reducing its $90 billion in monthly bond purchases and hints of a mid-2022 rate hike as inflation continued to surge past targets.
“The Fed is looking to get out of the bond-buying business in double time," Greg McBride, chief financial analyst at Bankrate, said.
"Just one month after initiating the taper, they have doubled the pace of withdrawal in an effort to conclude by March so they can raise interest rates sooner.”
Both consumer price and factory gate inflation readings came in at the fastest pace in nearly 40 years last month, powered by a combination of energy price surges, supply chain disruptions and labor market tightness.
That's not only pushed the Fed into changing its view on future inflation readings -- Powell himself said it was time to retire the word "transitory" -- but also had traders betting on near-term rate hikes.
As for consumers, McBride said, since interest rates are going to start rising in 2022, they should be "making headway on paying off high-cost credit cards, consolidating debt at lower fixed rates, and refinancing [mortgages.]"
Investors have also had to navigate some conflicting overnight data as well, including a big miss on November retail sales in China and the fastest reading of U.K. inflation in at least 10 years.
Add more omicron concerns to the mix -- alongside a warning on its virulence from the World Health Organization -- and its easy to understand why markets are reluctant to extend risk ahead of the Fed statement.
"Omicron is spreading at a rate we have not seen with any previous variant," WHO Director-General Tedros Adhanom Ghebreyesus told reporters. "Even if Omicron does cause less severe disease, the sheer number of cases could once again overwhelm unprepared health systems.
Stocks had been little-affected by the November reading for retail sales, as well, which showed a sharp decline from October's pace to a collective $639.8 billion.
On Wall Street, the Dow Jones Industrial Average was 383 points higher while the S&P 500 added 76 points.
The tech-focused Nasdaq Composite -- which has fallen 2.5% over the past two days -- leaped 328. Benchmark 10-year Treasury note yields ticked higher to 1.463%.
Eli Lilly (LLY) - Get Eli Lilly and Company Report shares were a notable mover, rising 10% after the drugmaker lifted its forecast for Covid therapy sales, while boosting its full-year profit estimate, heading into an investor day presentation in Indianapolis.
Lowe's Cos. (LOW) - Get Lowe's Companies, Inc. Report shares were also active, edging 2% higher after the retailer issued a muted 2022 profit outlook that could signal slowing home improvement demand.
Toyota Motor (TM) - Get Toyota Motor Corp. Report shares advanced 3.3% on Wednesday after the world's biggest carmaker unveiled a $70 billion investment commitment to boost its sales of electric vehicles by the end of the decade.
Toyota CEO Akio Toyoda said he wants to have a full lineup of 30 battery electric vehicles on sale by 2030, a figure that would double the total it expects for 2025, while adding another $4.5 billion to its battery development spending, which already includes a new plant in North Carolina.
Elon Musk was also back in the headlines, this time taking on Democratic Sen. Elizabeth Warren in a Twitter battle focused on his recent decision to dump $13 billion in Tesla (TSLA) - Get Tesla Inc Report shares in order to meet tax obligations.
WTI oil futures on Wednesday for January delivery rose 80 cents from Tuesday's close to change hands at $71.53 a barrel.