Stocks rise as Fed holds rates steady
Stocks edged higher Wednesday after the Federal Reserve reassured investors it was in no rush to raise interest rates from historically low levels.
The central bank said that the economy is strengthening, but not enough for policymakers to signal an imminent rate hike. The Fed’s benchmark rate has remained near zero for more than six years in an effort to bolster the economy and encourage borrowing, lending and investment.
Surging stocks and historically low interest rates have gone hand in hand over the last six years, pushing the market to all-time highs.
As the economy has recovered, investors have been trying to gauge when the Fed will begin raising rates and how aggressively it will raise them. Investors worry that, should the Fed raise rates too quickly, it could stif le growth.
“This makes the market feel more confident,” said Alan Rechtschaffen, financial advisor at UBS Wealth Management Americas.
The Dow Jones industrial average gained 31.26 points, or 0.2%, to 17,935.74. The Standard & Poor’s 500 index rose 4.15 points, or 0.2%, to 2,100.44. The Nasdaq composite rose 9.33 points, or 0.2%, to 5,064.88.
Bond prices rose after the Fed released its statement, reversing an earlier sell-off.
Eight of the 10 sectors in the S&P 500 index ended the day higher, with utilities leading the gains. The sector rose 0.9% but remains down 9.7% this year.
The major stock indexes remain close to their record highs set in May but have sagged in the last month as investors have focused on the Fed.
The Dow is still up 0.6% this year despite dropping 2% from its last record close on May 19. The S&P is up 2% for the year and off 1.4% from its high on May 21. The Nasdaq is faring the best. It’s up 6.9% this year and off less than 1% from its most-recent high May 27.
The yield on the 10-year Treasury note fell to 2.31% from 2.38% just before the statement was released.
Aside from the Fed, investors were also keeping an eye on negotiations between Greece and its lenders.
Greece remained deadlocked in talks with creditors Wednesday, and there was little sign of a breakthrough a day ahead of a meeting of the 19 finance ministers from countries that use the euro. Greece needs to get more loans before the end of the month, when its bailout program expires and it is scheduled to make a big payment to the International Monetary Fund.
European markets have slumped in the last month as the talks have failed to produce an agreement. Greece’s benchmark index sank 3% on Wednesday and is down 18% this year.