Treasuries rise, dollar falls on Fed outlook

Treasuries rose and the dollar slipped for the first time in five days after the Federal Reserve increased interest rates and raised its outlook for economic growth in 2018 without lifting its forecast for the number of hikes next year. Stocks were mixed.

The S&P 500 Index ended lower after a swoon in the final 15 minutes of trading. Stocks earlier spiked to an intraday record on the Fed’s widely anticipated announcement that it was hiking rates by a quarter of a percentage point amid rising optimism in the economy. The 10-year yield slumped with the dollar after officials kept their projections for hikes next year unchanged as inflation remains persistently sluggish. The small-cap Russell 2000 Index, whose members’ fortunes are most closely tied to economic gains, remained the strongest performing equity gauge.

“Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. Inflation will remain below the Fed’s 2 percent goal in the near term but will “stabilize” around the target in the medium term, the central bank said.

Market strategists said the Fed’s statement was good news for stocks.

“This is a tailwind for equities as it implies that growth has improved while inflation remains weak making the FOMC unlikely to tighten too quickly,” Dennis DeBusschere, head of portfolio strategy at Evercore ISI, wrote in a note to clients. “Inflation will move higher next year, which will firm up market expectations for rate hikes toward the Fed’s view and cyclical/financial stocks will outperform.”

The dollar halted four days of gains, its longest winning streak since January 2016. Earlier, data showed U.S. consumer inflation picked up in November, though the socalled core gauge — which excludes food and energy costs — unexpectedly slowed. On Tuesday, the U.S. Labor Department reported that the producer price index rose more than forecast in November.