Wall Street rises as Fed's rate decision looms

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By Ankika Biswas and Johann M Cherian

(Reuters) -Wall Street's main indexes rose on Wednesday ahead of the Federal Reserve's monetary policy decision and economic projections for clues on the path of interest rates.

The U.S. central bank is expected to raise its key rate by 50 basis points to 4.25-4.50% at its last meeting of 2022 after four straight 75 bps increases following a surprise drop in inflation.

The decision, scheduled for 2 p.m. ET, will be followed by Chair Jerome Powell's press conference.

Fed officials will also issue new projections showing just how close that endpoint of rates may be, with Tuesday's data showing cooling inflation data for November triggering bets across stock and bond markets it may be closer than expected.

"Markets are looking for what they've already discounted and that is a 50 basis point hike, but going forward the focus will be on the dot plot which may indicate the Fed's terminal rate," said Peter Cardillo, chief market economist at Spartan Capital Securities LLC in New York.

"If it's between 4% and 5%, well that's already priced in. If it's higher, that could be a little bit of a negative surprise."

Money market participants expect two more 25 basis-point hikes next year, taking the terminal rate to 4.82% by May.

The U.S. central bank, in its battle against decades-high inflation, has raised its policy rate by 375 basis points so far this year to a 3.75%-4.00% range from near zero, the fastest pace of rate hikes since the 1980s.

Fears that aggressive interest rate increases by major central banks could tip the global economy into a recession have hammered risk assets such as equities this year.

The S&P 500 and the Nasdaq have lost 15.2% and 27.6%, respectively, this year and are on track for their worst annual performance since the 2008 financial crisis.

The rate-sensitive S&P 500 real estate sector index and growth index have posted double-digit drops this year.

At 12:08 p.m. ET, the Dow Jones Industrial Average was up 208.24 points, or 0.61%, at 34,316.88, the S&P 500 was up 22.32 points, or 0.56%, at 4,041.97, and the Nasdaq Composite was up 61.82 points, or 0.55%, at 11,318.64.

All the 11 major S&P 500 sectors were in the green. Gains were led by defensive sectors, often preferred in times of economic uncertainty, such as healthcare, utilities and industrials.

Megacap growth stocks such as Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), Mastercard Inc (NYSE:MA) and Qualcomm (NASDAQ:QCOM) Inc gained between 1.1% and 1.7%.

Tesla (NASDAQ:TSLA) Inc slipped 1.1% after a Goldman Sachs (NYSE:GS) analyst trimmed the price target for the electric-vehicle maker's stock.

Charter Communications Inc (NASDAQ:CHTR) slid 13.7% as brokerages cut their price targets following the telecom services firm's mega spending plans on higher-speed internet upgrade.

Pfizer Inc (NYSE:PFE) gained 2.4% following an agreement with China Meheco Group Co Ltd to import and distribute the U.S.-based company's oral COVID-19 treatment Paxlovid in mainland China.

Advancing issues outnumbered decliners by a 1.89-to-1 ratio on the NYSE and 1.51-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and one new low, while the Nasdaq recorded 56 new highs and 136 new lows.