Fed efforts embolden Wall Street

Investors still ‘betting on a recovery’ and hoping for vaccine.

NEW YORK — Wall Street rallied on Wednesday, and the S&P 500 climbed 1.2% for its best day in two weeks after the Federal Reserve kept the accelerator floored on its support for the economy.

U.S. stocks began rising as soon as trading opened, and momentum picked up after the Fed said in the afternoon that it will keep interest rates at their record low as the economy struggles through the recession created by the coronavirus pandemic.

The Dow Jones Industrial Average rose 0.6% and the Nasdaq composite added 1.4%.

Besides keeping short-term rates pinned at nearly zero, the Federal Reserve also said it will continue to buy about $120 billion in Treasury and mortgage bonds each month to support the economy. “The markets are very strong, but the real economy is not so strong,” said Kirk Hartman, president and global chief investment officer at Wells Fargo Asset Management. “The markets are betting on a recovery, on a vaccine rolling out at the end of the year. That’s the only way you can justify the market” at the levels it’s reached, along with the continued rescue efforts by the Federal Reserve.

Besides the action in Washington, this is also a frenetic week for profit reports, some of which topped Wall Street’s expectations.

Eastman Kodak’s stock more than tripled for the second straight day after the company won a $765 million government loan to launch a new business unit making pharmaceutical components. It surged 318.1% to $33.20, up from $2.62 on Monday.

The yield on the 10-year Treasury dipped to 0.57% from 0.58% late Tuesday.