Fed’s 25 bps rate hike propels US stocks, treasuries rally
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New York: US stocks rose the most in two weeks, Treasuries rallied and the dollar tumbled after the Federal Reserve raised interest rates as expected without accelerating its timeline for future tightening.
The S&P 500 Index jumped as the first rate hike of 2017 didn’t alter officials’ expectations that the central bank will tighten a total of three times this year. Equities extended gains as chair Janet Yellen said in a press conference that the “simple message is the economy is doing well.” The yield on 10-year Treasury notes tumbled below 2.50%, gold climbed to $1,220 an ounce and the Bloomberg Dollar Spot Index slid more than 1%. West Texas Intermediate oil jumped more than 2%, adding to gains as the dollar weakened.
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The Fed raised its benchmark lending rate a quarter point and continued to project two more increases this year. Investors anticipated the tightening and Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace of tightening. Those trades unwound Wednesday afternoon as the Fed indicated it hasn’t fallen behind with its efforts to keep inflation in check as economic growth shows signs of accelerating.
The rate decision kicks off a two-day period brimming with central bank moves, European political drama and a raft of economic data. At the same time, oil’s recent swoon had investors weighing whether energy prices will touch off any market turbulence after commodities contributed in large part to firming inflation numbers. Bloomberg
—With assistance from Stephen Kirkland Natasha Doff and Samuel Potter