S&P 500 meets key daily support after hawkish Fed hike

• Wall Street buckles on a hawkish hike but US stocks are supported.
• The S&P 500 index is retesting the W-formation's neckline and potential support at a 78.6% Fibonacci retracement level. 

US stocks turned lower after the Federal Reserve raised rates by half a percentage point. However, while the Fed has downshifted the pace of tightening, the message given to the financial markets is that they’re not done yet.

 The federal funds target range now stands at 4.25%-4.50%. At the same time, the Fed expects further rate hikes to over 5%, which is more than before. There are no signals yet of a pause in the rate hike cycle, however, the benchmarks started to correct the initial knee-jerk sell-off in the mid-latter part of the event.

The S&P 500 was moving off its lows of 3,965.65 to retest the 4,030s. At the time of writing, the index is trading down 0.6% at 3,995.33. There has been a mirror image in price action across the Nasdaq and Dow Jones as well. 

While the Fed has signalled its plans to keep lifting rates next year to combat high inflation Fed's chair Jerome Powell was speaking and his comments seemed to have given mixed messages to the market. Consequently, we were seeing two-way price action on Wall Street. In US Treasury yields, they have flipped with the 10-year falling back from a high of 3.5610% to print 3.477% currently and on the way towards the day's low of 3.46%.

Fed key takeaways

• The Federal Reserve hikes 50 basis points, as expected
• Target Range stands At 4.25% - 4.50%.
• The vote was unanimous.
• The guidance in the statement repeats that: "The Committee anticipates that ongoing increases in the target range will be appropriate."

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S&P 500 technical analysis

The index is moving within a bullish cycle and channel, currently retesting the W-formation's neckline and potential support at a 78.6% Fibonacci retracement level. If bulls were to step in here, there would be prospects of an upside continuation towards channel resistance and prior highs near 4,200.