Stocks maintain gains after the Fed raises rates for the first time since 2018

The S&P 500 rallied for a second day, hitting the highs of the session on a report that Ukraine and Russia are making strides toward a peace agreement.

Federal Reserve announced at the conclusion of its two-day meeting Wednesday that it will increase short-term interest rates by a quarter of a percentage point, a well-telegraphed move by the central bank as it seeks to control surging inflation.

Stocks pared some of their gains after the Fed said it would hike rates another six times this year, more aggressively than many traders had expected.

The Dow Jones Industrial Average climbed 106 points, or 0.3%. The S&P 500 added 0.7% and the Nasdaq Composite gained 1.5%.

Stocks rallied earlier in the day following a Financial Times report that Ukraine and Russia have made “significant progress” on a peace plan and Russian withdrawal.

Before the FT report, stocks were gaining on hopes that some sort of ceasefire was close. Ukrainian President Volodymyr Zelenskyy said a peace agreement was beginning to “sound more realistic” in an address to the nation Tuesday. Russian Foreign Minister Sergey Lavrov told the BBC there was “some hope of reaching a compromise.” Russian State media quoting the Kremlin echoed similar sentiments overnight.

“You’re starting to see some resolution of some of the overhang in terms of the broader economic issues,” said Stephanie Lang, chief investment officer at Homrich Berg. “The market is hoping for resolution in the Ukraine, but of course, it’s just talks at this point, and we actually need to see a ceasefire, we need to see that play out in more entirety before we close the loop on that so there’s still a lot of uncertainty.”

The war between Ukraine and Russia has sent ripples through global financial markets, pushing commodity prices sharply higher and stocks lower. However, some commodities have cooled off in recent days, while the U.S. equity market tries to find its footing.

U.S. oil traded lower on Wednesday following the FT report, after topping a multiyear high of $130 earlier this month.

Micron Technology was among the best-performing S&P 500 stocks, gaining more than 7%. Starbucks shares climbed 6% after an upgrade from JPMorgan, while Dow member Boeing advanced more than 3%.

Several Chinese stocks rocketed more than 20% higher after China signaled its support for overseas listings, after days of worries around delisting led them to tumble. Pinduoduo surged 45% and DiDi Global jumped 46%. The China Internet ETF is on pace for best day ever, up more than 29%, after its worst day ever on Monday.

Stocks are coming off a stellar session in which the Dow surged nearly 600 points, while the S&P 500 snapped a three-day losing streak.

In economic data, consumers continued to spend in February through at a slower pace than expected, according to a Commerce Department report Wednesday. Advance retail sales grew 0.3% for the month, slightly below the 0.4% Dow Jones estimate.

To be sure, all eyes are on the Fed on Wednesday, as the central bank wraps up a key two-day policy meeting.

The Fed is widely expected to raise rates by a quarter-point, the first hike since 2018. Watchers are also expecting the central bank to offer a new quarterly forecast that could indicate five or six more hikes this year.

“My stance is that the Fed is going to continue to be measured, even if we continue to see these high inflation numbers, because they’re going to be more concerned about the hard landing than elevated inflation,” Lang said.

“My expectation is there aren’t going to be any big surprises,” she added. “The actual move today is widely telegraphed, it’s more about where the Fed goes from here. And if you look at past hiking cycles, the market has always typically been ahead of where the Fed is.”

The Fed is expected to announce an interest rate decision and economic projections at 2 p.m. on Wednesday, which will followed by a briefing from Federal Reserve Chair Jerome Powell.