US stocks rose sharply on Wednesday after the Federal Reserve raised interest rates for the second time in three months, as expected.
The Fed, which raised its target rate by 25 basis points, or a quarter of a percentage point, to between 0.75 and 1.00 per cent, did not however flag any plan to accelerate the pace of monetary tightening, a concern that had lingered among some market participants.
Markets were expecting the Fed's decision and traders had priced in more than a 90 per cent chance of a quarter-point rate increase, according to federal funds futures.
“People were thinking the Fed might be more aggressive, so the fact that they weren't means more complacency and a continued course,” said Eric Schoenstein, co-portfolio manager of the Jensen Quality Growth Fund in Portland, Oregon.
“The statement was not as hawkish as it might have been.”
During her press conference after the meeting, Fed Chair Janet Yellen pointed to the stock market as an indicator of easing financial conditions, which some could take as a sign that stock valuations are not yet at stress levels.
She cast the markets role as a positive one on consumer balance sheets and left it at that. It will be read as an implicit endorsement of current valuations, which many consider quite high,” said Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York.
The Dow Jones Industrial Average rose 112.73 points or 0.54 per cent to 20,950.1, the S&P 500 gained 19.81 points or 0.84 per cent to 2,385.26 and the Nasdaq Composite added 43.23 points or 0.74 per cent to 5,900.05.
The Russell 2000 index of small-cap stocks rose 1.5 per cent, while financials on the S&P 500 were the worst-performing sector.
US retail sales recorded their smallest gain in six months in February, setting US gross domestic product on track to grow at a 0.8 per cent annualised pace in the first quarter, according to the Atlanta Fed's latest forecast.
Energy stocks boosted the S&P 500 as oil prices rose for the first time in more than a week on a surprise drawdown in US crude inventories. US crude gained 2.6 per cent to $48.96 per barrel and Brent added 2.3 per cent to $52.08.
Exxon shares rose 1.2 per cent and Chevron added 1.4 per cent.
Apple closed up 1.1 per cent at $140.46 after RBC raised its price target on the stock.
Twitter ended down 1.9 per cent at $15.03 after a number of prominent accounts on the microblogging website were hacked.
Advancing issues outnumbered declining ones on the NYSE by a 6.84-to-1 ratio; on Nasdaq, a 2.28-to-1 ratio favoured advancers.
The S&P 500 posted 74 new 52-week highs and two new lows; the Nasdaq Composite recorded 125 new highs and 42 new lows.
About 7.87 billion shares changed hands on US exchanges, higher than the 6.98 billion daily average over the last 20 sessions.