LONDON: U.S. stocks closed higher Wednesday after the Federal Reserve offered no clear indication of the timing of the next rate hike, but left itself room to act as early as September, citing continued “solid” gains in the job market.
Policy makers voted unanimously to keep a key U.S. interest rate unchanged and reiterated their dependency on data to determine their game plan for tightening monetary policy.
Early action in the stock market on the heels of the report was choppy. The main benchmarks, which were already higher Wednesday, driven by gains in the energy, industrials and transportations stocks, initially shot higher after the policy statement was released at 2 p.m. Eastern Time, but indexes pared gains 10 minutes later as investors digested the statement, only to bounce higher.
Robin Anderson, senior economist at Principal Global Investors, said there continues to be a disconnect between the Fed’s projections for the interest rates and for the market’s expectations.
“The biggest risk for the market is…if the economy accelerates in 2016-2017 and the Fed [has] to tighten faster. Then expectations would change rapidly and that may destabilize markets,” said Anderson.
The S&P 500 SPX, +0.73% ended up 15.32 points, or 0.7%, to 2,108.57, with all 10 main sectors finishing higher. A jump in oil prices provided support to energy stocks, while industrials and consumer discretionary sector stocks also rallied. The Dow Jones Industrial Average DJIA, +0.69% rose 121.12 points, or 0.7%, to 17,751.39, marking the fifth consecutive triple-digit move for the blue-chip index.
The tech-heavy Nasdaq Composite COMP, +0.44% ended the session up 22.53 points, or 0.4%, at 5,111.73.
