(Reuters) – The S&P 500 and Dow Jones Industrial Average closed at record highs on Wednesday after the Fed predicted a rapid economic recovery from the coronavirus pandemic and said it would maintain its near-zero interest rate.
In its statement following its two-day policy meeting, the Federal Reserve projected a rapid increase in US economic growth and inflation as the COVID-19 crisis subsided, reiterating its promise to keep its target interest rate zero for years to come.
Wall Street has extended gains after Fed Chairman Jerome Powell told a news conference that it was too early to discuss declining measures in support of the struggling economy.
“The Fed statement today was more optimistic than some expected, and they raised their prospects for both economic growth and the labor market. The market’s view is that it was fairly optimistic, ”said David Carter, chief investment officer at Lenox Wealth Advisors in New York.
A $ 1.9 billion management stimulus and the deployment of vaccines have fueled so-called value stocks that are likely to outperform the economy recovering from the coronavirus pandemic.
At the same time, concerns that the stimulus could overheat the economy and lead to higher inflation rates have caused a sharp rise in long-term Treasury yields and made technology and other growth stocks less attractive.
Following the Fed statement, the yield on 10-year treasury rose lower to 1.6374%.
The Dow Jones industrial average rose 0.58% to 33,015.37 points, while the S&P 500 rose 0.29% to 3,974.12.
The Nasdaq Composite climbed 0.4% to 13,525.20.
The Nasdaq remains about 4% lower than its record high on February 12th.
Amazon.com Inc rose 1.4% and Tesla Inc rose 3.7%, with the two companies giving the S&P 500 the biggest boost.
Six of the 11 S&P 500 sector indices rose, with industrial and consumer discretionary the strongest performers and both by more than 1%.
Fast food retailer McDonald’s Corp. rose 1.9% after Deutsche Bank raised its target price on the stock and also improved its “buy” recommendation of “hold”.
Progressive issues were less than declining on the NYSE with a 1.33-to-1 ratio; on Nasdaq is a 1.46-to-1 ratio proponents.
The S&P 500 reached 44 new 52-week highs and no new lows; the Nasdaq Composite recorded 124 new highs and 18 new lows.
The US stock market was 11.9 billion shares compared to the average of 14.2 billion for the full session over the past 20 trading days.
Reporting by Noel Randewich in Oakland, California; Additional reporting by Shashank Nayar and Medha Singh in Bengaluru; Edited by Matthew Lewis