New York: US stocks climbed after the Federal Reserve said the pace of any tightening will be gradual as Chair Janet Yellen wants to see more decisive evidence of economic growth.
The Standard & Poor’s 500 Index rose 0.3% to 2,103.15 at 3.05 pm in New York, near its average price during the past 50 days. The Dow Jones Industrial Average added 55.78 points, or 0.3%, to 17,960.26. The Nasdaq Composite Index increased 0.3%.
“They said the economy is back on track, but there’s no hint at all of an immediate tightening,” John Canally, chief economic strategist at LPL Financial Corp. “It looks like there’s a shallower rate hike path for 2016 and 2017. That should be supportive of risk assets.”
Fed officials maintained their forecast for the benchmark interest rate at the end of 2015, while lowering it for next year. Policy makers predicted the rate will rise to 0.625% this year, according to their median estimate. That implies two quarter-point increases. Next year, they expect the rate to climb to 1.625%, lower than a March forecast of 1.875%.
A rebound in job growth is giving Fed officials reason to look beyond a first-quarter economic slowdown as they consider when to tighten policy. At the same time, inflation remains below their target, and central bankers say the timing of a rate increase depends on how economic data unfold.
Recent data from retail sales to wage growth have been improving, though a report on Tuesday indicated builders began work on fewer houses in May following a surge the prior month. That followed a disappointing factory report on Monday that pushed stocks lower.
“We are sort of in a Goldilocks economy where we don’t have to rush to make any drastic moves,” said Myles Clouston, senior director of Nasdaq Advisory Services. “The Fed has the luxury to take their time and be thoughtful given that the economy is showing signs of improvement on multiple fronts. Things seem to be moving smoothly.”
The S&P 500 has more than tripled from its March 2009 low, buoyed by three rounds of stimulus from the Fed. The index is down 1.9% from an all-time high reached last month.
Nine of the S&P 500’s main groups rose, led by utilities and consumer shares. The Chicago Board Options Exchange Volatility Index fell 4.3% on Wednesday to 14.18. The gauge, known as the VIX, fell 3.8% on Tuesday, retreating from an 11-week high.
Sofia Horta e Costa in London contributed to the story. Reuters
