WASHINGTON: US stock indexes overcame an afternoon wobble to close mostly higher on Wednesday after the Federal Reserve said it would start reducing its huge bond portfolio next month and was still on track to raise interest rates later this year. The central bank’s announcement drove bond yields higher, lifting shares in banks and other financial companies. Banks benefit from higher bond yields because it means they can charge higher interest rates on loans. High-dividend stocks like utilities and household goods makers fell. Income-seeking investors find those stocks less appealing when bond yields move higher. “The announcement was pretty much in line with what was expected,” said David Chalupnik, head of equities at Nuveen Asset Management. “So far, the market is taking it in stride, but I don’t know if it should. This will slowly impact growth.”
The S&P 500 index inched up 1.59 points, or 0.1 per cent, to 2,508.24. The Dow Jones Industrial Average rose 41.79 points, or 0.2 per cent, to 22,412.59. The modest gains nudged both indexes to record highs, extending a run of milestones that stretches back to last week. The Nasdaq composite lost 5.28 points, or 0.1 per cent, to 6,456.04. The Russell 2000 index of smaller-company stocks added 5.02 points, or 0.4 per cent, to 1,445.42. Markets elsewhere were mixed on Wednesday.
In Europe, Germany’s DAX rose 0.1 per cent, while the CAC 40 in France added 0.1 per cent. The FTSE 100 index of leading British shares was flat. In Asia, Japan’s Nikkei 225 added 0.1 per cent and South Korea’s Kospi slipped 0.2 per cent. Hong Kong’s Hang Seng Index added 0.4 per cent. Australia’s S&P/ASX 200 fell 0.1 per cent. Trading on Wall Street had been mostly subdued this week ahead of the Fed’s announcement. Fed policymakers decided to leave the central bank’s short-term benchmark interest rate between 1 per cent and 1.25 per cent, but also said they still expect to increase the rate one more time this year and three times in 2018, if persistently low inflation rebounds.
