Stocks gain on Federal Reserve view
NEW YORK — Stocks rose on Wednesday, with the S&P 500 ending at a record after the Federal Reserve hinted at a slightly faster pace of interest-rate increases starting next year but suggested rates in the long run would be lower than it had indicated previously.
The benchmark S&P 500 set intraday and closing record highs while the CBOE Volatility Index or the VIX, Wall Street’s fear gauge, fell to its lowest since February 2007.
“It’s onwards and upwards for equities, especially after the Fed’s announcements today,” said Mike Arone, chief investment strategist for State Street Global Advisors’ intermediary business in Boston.
“There is an improved labor environment and inflation that is still below what the Fed considers a normal level,” Arone said. “I think that environment shapes up very well for risk assets and equities in particular.”
After a two-day policy meeting, the U.S. central bank slashed its forecast for U.S. economic growth this year to a range of between 2.1 percent and 2.3 percent from an earlier projection of around 2.9 percent. But the Fed’s forecasts for 2015 and 2016 were unchanged, and it expressed confidence that the recovery was on track.
“Economic activity is rebounding in the current quarter and will continue to expand at a moderate pace,” Fed Chair Janet Yellen told a news conference. “The economy is continuing to make progress towards our objectives” of full employment and 2 percent inflation.
As widely expected, the Fed pushed ahead with plans to wind down one of its main stimulus programs, reducing its monthly bond purchases to $35 billion from $45 billion.
The Dow Jones industrial average rose 98.13 points or 0.58 percent, to end at 16,906.62. The S&P 500 gained 14.99 points or 0.77 percent, to 1,956.98, a record closing high. The Nasdaq Composite added 25.60 points or 0.59 percent, to 4,362.84.
Wednesday’s advance pushed the S&P 500 above its previous record closing high of 1,951.27, which was set on June 9.