S&P 500, Dow extend gains following Fed statement
The Dow and S&P 500 added to gains on Wednesday after the U.S. Federal Reserve delivered a policy statement that bolstered expectations it will keep interest rates near zero for a prolonged period.
The Dow rose more than 1% and the Nasdaq turned positive after the the Fed kept rates near zero and promised to keep them near there until inflation is on track to “moderately exceed” the U.S. central bank’s 2% inflation target “for some time.”
The central bank’s two-day meeting is its first under a newly adopted framework that promises to shoot for inflation above 2% to make up for periods where it runs below that target.
“We’ve come a long way from (President Donald) Trump saying the Fed is ‘loco’ for raising rates. The Fed is clearly now offering unbridled support for markets and the economy,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.
The Dow Jones Industrial Average .DJI rose 291.63 points, or 1.04%, to 28,287.23, the S&P 500 .SPX gained 21.08 points, or 0.62%, to 3,422.28 and the Nasdaq Composite .IXIC added 20.80 points, or 0.19%, to 11,211.12.
The S&P 500 and Dow were modestly higher before the statement, while the Nasdaq was lower.
The tech index .SPLRCT jumped 1.5%, extending its recovery from a brutal sell-off earlier this month that had halted a Wall Street rally.
“The correction has probably run its course and markets are now back to focusing on some of the positives,” said John Praveen, portfolio manager at QMA.
“Some positive news on the vaccine front and economic data suggest this global recovery after the COVID recession is on track, and the markets are supported by a very friendly Fed.”
In its first policy meeting since Fed Chair Jerome Powell announced a more accommodative stance on inflation, the central bank could switch its Treasury purchases toward more long-dated debt to keep long-term yields low, some strategists said.