US stocks surge as Fed signals caution on rates
Traders work in a booth on the floor of the New York Stock Exchange, as Federal Reserve Chair Janet Yellen’s news conference appears on a screen, Wednesday, March 18, 2015. Wall Street stocks surged Wednesday after the Federal Reserve trimmed its US economic forecast and signaled a cautious approach to raising interest rates. AP PHOTO/RICHARD DREW
NEW YORK–The Dow Jones Industrial Average advanced 227.11 points (1.27 percent) to 18,076.19.
The broad-based S&P 500 gained 25.14 (1.21 percent) at 2,099.42, while the tech-rich Nasdaq Composite Index jumped 45.39 (0.92 percent) to 4,982.83.
The Fed dropped a pledge to remain “patient” on raising interest rates, signaling a midyear federal funds rate hike remained possible after keeping the key rate at the zero level for more than six years.
But other language in the Fed’s statement emphasized that the central bank was in no rush to hike the ultra-low rates, which have supported the stock market. The Fed also broadly lowered its outlook on the US economy this year.
“The market was kind of anticipating the worst of all worlds and when that didn’t happen, you got this spring-back rally,” said Mace Blicksilver, director at Marblehead Asset Management.
“Just because the word ‘patient’ was removed doesn’t mean the rates definitely are going up and if they are, they are not doing that so dramatically,” said Michael James, managing director of equity trading at Wedbush Securities.
Dow members ExxonMobil and Chevron gained 2.4 percent and 3.4 percent, respectively, as oil prices jumped following the Fed statement.
Technology stocks advanced, including Facebook (+2.0 percent), Google (+1.6 percent) and Priceline (+2.4 percent). Apple added 1.2 percent.
Shipping company FedEx fell 1.4 percent after reporting third-quarter earnings rose 53 percent to $580 million. The company projected full-year earnings of $8.80-$8.95 per share, slightly below the analyst estimate of $8.97 per share.
Software giant Oracle rose 2.9 percent as it reported flat third-quarter revenues of $9.3 billion, despite a big drag from the strong dollar. The company said revenues would have risen six percent in constant currencies.
Adobe Systems, another software company, fell 3.5 percent as it projected second-quarter earnings of 41-47 cents per share, below the 48 cents expected by analysts
Starbucks rose 1.5 percent as it announced a two-for-one stock split.
Bond prices rose. The yield on the 10-year US Treasury fell to 1.91 percent from 2.08 percent Tuesday night, while the 30-year dropped to 2.50 percent from 2.65 percent. Bond prices and yields move inversely.
