a screen displays the fed rate announcement as a trader watches on the floor of the new york stock exchange nyse in new york city may 4 2022 stock futures fell slightly after the federal reserve raised rates by half a point and the major averages rallied to end the day futures tied to the dow jones industrial average lost 46 points or 01 sp 500 futures and nasdaq 100 futures each fell 01 in regular trading the dow jones industrial average rose 932 points or 281 and the sp 500 gained 299 for their biggest gains since 2020 the nasdaq composite jumped 319 stocks rose for a third straight day to start the month after the fed increased its benchmark interest rate by 50 basis points as expected and said it would begin reducing its balance sheet in june however investor sentiment which has been bogged down since the start of the year flipped during powells press conference when he clarified that the fed is not actively considering a larger 75basispoint rate hike some wall street strategists had suggested markets could see a relief rally after the rate increase after powells comments investors seemed at ease about the central banks ability to slow inflation without triggering a recession still the fed remains open to the prospect of taking rates above neutral to rein in inflation zachary hill head of portfolio strategy at horizon investments noted despite the tightening that we have seen in financial conditions over the last few months it is clear that the fed would like to see them tighten further he said higher equity valuations are incompatible with that desire so unless supply chains heal rapidly or workers flood back into the labor force any equity rallies are likely on borrowed time as fed messaging becomes more hawkish once again