US stocks witnessed a jump after the Federal Reserve raised interest rates by half a point for the first time in two decades. Chairman Jerome Powell indicated that the economy can avoid a recession.

The Dow Jones Industrial Average jumped 2.8%, or 932 points, while the Nasdaq Composite and S&P 500 rose 3%. 

“I think we have a good chance to have a soft or softish landing or outcome, if you will, I’ll give a couple of reasons for that. One is households and businesses are in very strong financial shape” Powell said.

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This happened just as policymakers faced increasing pressure to move more aggressively to calm the demand and the slow rising consumer prices, which hit a 40-year high in March.

The change in the interest rates from the banks could largely help the financials.

In terms of earnings following the raise in the benchmark lending rate by 50 basis points, Starbucks reported record quarterly sales of $7.6 billion, which matched Wall Street’s estimates. Adjusted earnings of 59 cents per share slides short of estimates. 

Meanwhile, with no uptick, the shares of Lyft Inc. plummeted after the ride-sharing company said it would have to spend more to attract drivers and forecast operating earnings less than Wall Street estimates.

The Fed also announced that it will start reducing its huge $9 trillion balance sheet – mostly comprising of Treasury and mortgage bonds.

With the beginning of June, the Fed said it would allow up to $48 billion in bonds to mature without replacing them. If things move forward at the similar pace, there are chances of the number reaching $95 billion by September.

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In case, the pace from September is retained, the balance sheet would decline by about $1 trillion a year.

Just ahead of the US central bank move, the Tokyo stocks ended slightly lower Monday. The 225-issue Nikkei Stock Average ended down 29.37 points, or 0.11 percent. The broader Topix index finished 1.27 points, or 0.07 percent, lower at 1,898.35.