Wall Street rallies as Fed keeps rates at record low

NEW YORK — Wall Street rallied 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 rose as soon as trading opened, and momentum picked up after the Fed said in the afternoon it will keep interest rates at their record low as the economy struggles through the recession created by the COVID-19 pandemic.

The S&P 500 gained 40.00 points to 3,258.44 for its second gain in the last three days. The Dow Jones Industrial Average rose 160.29, or 0.6%, to 26,539.57, and the Nasdaq composite added 140.85, or 1.4%, to 10,542.94.

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 Fed has done a lot,” said Kirk Hartman, president and global chief investment officer at Wells Fargo Asset Management. “It was very clear today that they’ll stand by and continue to be accommodative.”

Such aid from the Fed, along with stimulus from Congress, helped launch the stock market’s turnaround in March. Congress is also locked in negotiations for more support for the economy, with $600 in weekly unemployment benefits about to expire. Democrats and Republicans seem to remain far apart in their proposals, but investors are still hopeful about a deal’s chances.

If those two remain in hand, the big wild card for markets will continue to be the pandemic and whether a vaccine can be developed for it within the next year.

“The markets are very strong, but the real economy is not so strong,” Mr. Hartman said. “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.

The S&P 500 is back within 3.8% of its record set in February after earlier in the pandemic being down nearly 34%.