(Reuters) – The S&P 500 and Dow Jones Industrial Average closed at record highs on Wednesday after the Fed predicted a rapid economic recovery from the coronavirus pandemic and said it would keep its interest rate close to zero.
In its statement after the two-day monetary policy meeting, the Federal Reserve projected a rapid jump in US economic growth and inflation this year, with the end of the COVID-19 crisis, and repeated its promise to maintain its target of interest rate close to zero for years to come.
Wall Street widened its gains after Fed Chairman Jerome Powell said during a news conference that it was too early to discuss gradual reduction measures to support the struggling economy.
“The Fed’s statement today was more optimistic than some expected, they raised their prospects for economic growth and the job market. The market’s opinion on the statement is that it was very optimistic, ”said David Carter, investment director at Lenox Wealth Advisors in New York.
A $ 1.9 trillion spending stimulus and the launch of vaccines have fueled a rotation in so-called value stocks, which are likely to outperform as the economy recovers from the coronavirus pandemic.
At the same time, concerns that the stimulus could overheat the economy and lead to higher inflation rates have triggered a sharp increase in long-term Treasury yields and have made technology and other growth stocks less attractive.
After the Fed’s declaration, the yield on 10-year Treasury bills fell to 1.6374%.
The Dow Jones Industrial Average rose 0.58% to finish at 33,015.37 points, while the S&P 500 gained 0.29% to 3,974.12.
The Nasdaq Composite rose 0.4% to 13,525.20.
The Nasdaq remains down about 4% from the record close of February 12.
Amazon.com Inc rose 1.4% and Tesla Inc added 3.7%, with the two companies giving the biggest increase to the S&P 500.
Six of the 11 indices in the S&P 500 sector rose, with industrial and consumer discretionary sectors the best performers and both above 1%.
Fast-food retailer McDonald’s Corp gained 1.9% after Deutsche Bank raised its target price for shares and also updated its “buy” to “keep” recommendation.
Early issues outnumbered declining issues on the NYSE by 1.33 to 1; on the Nasdaq, a ratio of 1.46 to 1 favored the forwards.
The S&P 500 recorded 44 new 52-week highs and no new lows; the Nasdaq Composite recorded 124 new highs and 18 new lows.
The volume on the US stock exchanges was 11.9 billion shares, compared to the average of 14.2 billion for the entire session in the last 20 trading days.
Reporting by Noel Randewich in Oakland, California; Additional reporting by Shashank Nayar and Medha Singh in Bengaluru; Matthew Lewis Edition