Global stocks surge, dollar fades as Fed sees gradual tightening

Wed Mar 15, 2017 4:32pm EDT
 
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By Lewis Krauskopf

NEW YORK (Reuters) - U.S. stocks surged on Wednesday, while Treasury yields fell and the dollar weakened, after the Federal Reserve raised interest rates for the second time in three months but did not flag any plan to accelerate the pace of monetary tightening.

The dollar's plunge helped fuel gains in assets denominated in the U.S. currency, including oil and gold.

Investors had widely expected the central bank's rate increase, which was spurred by steady economic growth, strong job gains and confidence that inflation is rising to the Fed's target.

But the Fed's policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Further rate increases would only be "gradual," the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018.

"Lower rates, higher equities and a lower dollar all point to this being interpreted as more dovish than what was expected," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The Dow Jones Industrial Average .DJI rose 112.73 points, or 0.54 percent, to 20,950.1, the S&P 500 .SPX gained 19.81 points, or 0.84 percent, to 2,385.26 and the Nasdaq Composite .IXIC added 43.23 points, or 0.74 percent, to 5,900.05.

Energy shares .SPNY and defensive sectors such as utilities .SPLRCU and real estate .SPLRCR led gains.

    "Markets are recognizing that while the Federal Reserve will raise interest rates three times this year, there is not the risk that some were afraid of that they would move more aggressively based on what we have now," said Frances Donald, senior economist with Manulife Asset Management in Toronto.   Continued...

 
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 8, 2017. REUTERS/Brendan McDermid