Stocks notch up biggest gain in two weeks
Stocks clambered higher on Wednesday in their biggest gain in two weeks, easily absorbing the Federal Reserve's latest increase in interest rates.
The Standard & Poor's 500 index jumped 19.81 points, or 0.8%, to 2,385.26. It had been up through the day, and the gains accelerated immediately after the Fed made its announcement.
The Dow Jones industrial average rose 112.73 points, or 0.5%, to 20,950.10. The Nasdaq composite picked up 43.23 points, or 0.7%, to 5,900.05. The Russell 2000 index of small-company stocks jumped 20.45 points, or 1.5%, to 1,382.83. Gains were widespread, and seven stocks rose on the New York Stock Exchange for every one that fell.
The Fed raised short-term interest rates by a quarter of a percentage point, its third such move since the end of 2015. The move was widely expected after various Fed officials gave speeches telegraphing the increase and reports showed that the economy continues to strengthen and inflation has picked up.
The data have been so encouraging that some investors began to speculate whether the Fed may raise rates more aggressively. The yield on the two-year Treasury note, which is heavily influenced by changes in Fed policy, jumped on expectations for Fed action, for example. It climbed nearly a quarter of a percentage point in a little more than two weeks to 1.38% late on Tuesday.
When the Fed said that it was sticking with its forecast for three rate increases this year, the two-year yield gave up nearly half of that increase in just a few minutes. It later pared its loss and sat at 1.29% late on Wednesday.
The yield on the 10-year Treasury fell to 2.49% from 2.60% late Tuesday, and the 30-year yield fell to 3.11% from 3.18%. Both remain higher than they were a few weeks ago.
The dollar sank to 113.39 Japanese yen from 114.72 yen late on Tuesday. The euro rose to .0713 dollars from 1.0632 dollars, and the British pound climbed to 1.2301 dollars from 1.2145 dollars.
The drop in bond yields shone a warm light on stocks in industries known for paying relatively big dividends. Lower bond yields make the income provided by dividends more attractive, and real-estate investment trusts in the S&P 500 jumped 1.9%. Utilities rose 1.6%.
The day's biggest gains came from energy stocks. Those in the S&P 500 rose by 2.1% after the price of oil climbed, the first time that's happened in more than a week. A barrel of benchmark US crude rose 1.14 dollars to settle at 48.86 dollars. The 2.4% jump was the largest since January. Brent crude, which is used to price international oils, added 89 cents to 51.81 dollars a barrel in London.
The Commerce Department said early Wednesday that retail sales inched up by 0.1% in February, and it said sales in January were better than it previously believed. However delays in tax return payments may be holding spending back somewhat.
The Labour Department said consumer prices were 2.7% higher in February than a year earlier. After excluding the costs of food and energy, inflation was 2.2%. That's above the 2% target set by the Federal Reserve.
A housing market index by the National Association of Home Builders also surged to its highest level since 2005.
In overseas trading, the German DAX stock index rose 0.2%, the UK FTSE 100 index rose 0.1% and the CAC 40 in France was 0.2% higher. Japan's Nikkei 225 stock index lost 0.2%, and South Korea's Kospi was little changed. The Hang Seng in Hong Kong edged 0.1% lower.