Dollar slides, stocks rise after dovish Fed statement
A man looks at an electronic board showing the graphs of the recent fluctuations of the exchange rate between Japanese yen against the U.S. dollar (R) and the graphs of the Japan's Nikkei average outside a brokerage in Tokyo, Japan, February 29, 2016. REU
By Rodrigo Campos
NEW YORK (Reuters) - The S&P 500 closed at its highest in 2016, leading global stock gains, while the U.S. dollar weakened after the Federal Reserve held interest rates steady while lowering expectations for the number of rate hikes this year.
The Fed noted that the U.S. economy continues to face external risks, but indicated that moderate growth would allow it to resume tightening monetary policy this year.
Fresh projections, however, pointed to two quarter-point rate hikes by year's end, down from an expected four back in December.
The expectation for lower rates dragged the dollar down and hurt stocks in the financial sector. But major U.S. indexes rallied on the back of the Fed statement, with basic materials and energy sector stocks leading the way.
Commodity prices added to gains, boosted by a weaker greenback.
The CBOE volatility index <.VIX>, a gauge of what equity investors are willing to pay for protection against a drop in the S&P 500, closed at its lowest since early December.
"The Fed struck a very dovish tone, marking down its projected rate increase trajectory, while noting overall resilience in the U.S. economy and the absence of inflation pressures," said Brian Dolan, head market strategist at DriveWealth LLC in New Jersey.
"This should be encouraging for risk sentiment and risk assets."
The Dow Jones industrial average <.DJI> rose 74.23 points, or 0.43 percent, to 17,325.76 and the S&P 500 <.SPX> gained 11.29 points, or 0.56 percent, to 2,027.22, both ending at 2016 highs.
The Nasdaq Composite <.IXIC> added 35.30 points, or 0.75 percent, to 4,763.97.
MSCI's gauge of equities in major world economies <.MIWD00000PUS> jumped 0.7 percent. Nikkei futures
The U.S. dollar fell broadly, with the euro up 1 percent above $1.12 and the yen
The dollar initially rose after data showed an increase in underlying U.S. inflation and the housing market continued to strengthen.
U.S. Treasury yields fell across the board after the Fed's statement and Chair Janet Yellen's press conference.
Benchmark yields
Oil prices jumped after OPEC sources said oil producers, including Gulf OPEC members, support holding talks next month on freezing output even if Iran won't take part. The weaker dollar further boosted crude and other commodities.
U.S. crude
(Additional reporting by Gertrude Chavez Dreyfuss, Herbert Lash, Chuck Mikolajczak and Dion Rabouin; Editing by Meredith Mazzilli and Nick Zieminski)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Crude Inventory Declined 6.4 Million Barrels Last Week
- Almost 100 detained at anti-government protest in Armenia, media say
- Greek military ship intercepts two Houthi drones in the Red Sea
Create E-mail Alert Related Categories
Commodities, ReutersRelated Entities
Crude Oil, OPECSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!