Stock ETFs Rise After Fed’s First Rate Hike of 2023

More boosts in store this year after Wednesday’s .25% boost as inflation worries central bankers.

Reviewed by: Shubham Saharan
Edited by: Shubham Saharan

Stock exchange-traded funds rose after the Federal Reserve’s anticipated 25 basis point hike, as Fed Chairman Jerome Powell suggested the bank’s eighth straight increase is blunting soaring inflation. 

“We can say the disinflationary process has started,” Powell said during a press conference after the rate hike was announced, adding that more increases are coming. “The job is not fully done.” 

The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index, pared earlier losses and jumped 1.1% after the Fed’s announcement. The Invesco QQQ Trust (QQQ), which follows the top 100 Nasdaq stocks, rose 2.1%, adding to the gains that led to the best January for the index in over 20 years. The Dow Jones 30 ETF, the SPDR Dow Jones Industrial Average ETF Trust (DIA), posted muted gains, inching 0.1% higher. 

The rate increase was the latest in a series that began in March, and brings the federal funds rate between 4.5% and 4.75%. It was half of the last hike, a 50 basis point boost in December, and far smaller than four back-to-back 75 basis point increases before that.  

Powell added that the committee anticipates that heightened interest rates would be maintained “for some time” and that the central bank remains committed to return inflation to 2% from the 6.5% current rate announced in December by the Labor Department. 

“It will not be appropriate to cut rates this year,” he said. 

Meanwhile, the yield on the policy-sensitive two-year Treasury note dipped 11 basis points to 4.1%, resting under the current fed funds rate.  

Still, Powell continued to warn of one of the prime concerns the U.S. economy faces before the Federal Reserve begins easing rates: an unyielding labor market.  

“The labor market continues to be out of balance,” Powell said, pointing to the economy’s inability to fill job vacancies as fewer people enter the job market. “The job openings number has been quite volatile.”  

U.S. job openings increased to 11 million in December, according to the Labor Department’s Job Openings and Labor Turnover Survey released Wednesday. That exceeded both Bloomberg-polled analyst expectations of 10.3 million vacancies for the month, and the 10.4 million job openings in November 2022.  

"One of the big questions for the job market this year will be the extent to which the Federal Reserve’s rate raising campaign causes a rise in joblessness and a further slowdown in hiring,” said Mark Hamrick, senior economic analyst at, in a note to  

“The central bank can only address the demand side of the equation by imposing a virtual tax on the economy through rate hikes,” he added. 

Global events like Russia’s invasion of Ukraine are also weighing on the Fed’s decisions, bankers noted.  

“Russia's war against Ukraine is causing tremendous human and economic hardship and is contributing to elevated global uncertainty,” Federal Open Market Committee participants wrote in the statement announcing the rate increases. 


Contact Shubham Saharanat[email protected]       

Shubham Saharan is a markets reporter at Before joining the company, she reported for Bloomberg and the Financial Times. Saharan is a graduate of Barnard College of Columbia University.