Stocks jump after Federal Reserve leaves interest rates unchanged

U.S. stocks climbed Wednesday as investors felt relieved that the Federal Reserve once again left interest rates unchanged. That sent dividend-paying stocks higher. Energy companies jumped with the price of oil.

Stocks made a big gain after the Fed's decision, which ended weeks of confusion for investors. With the central bank confirming that it will raise interest rates slowly, bond yields dropped and utility and phone companies rose. The price of oil rose after the U.S. government said energy stockpiles shrank last week.

In the last two weeks, a few Fed leaders gave differing opinions on whether the central bank should raise interest rates now. That surprised investors, and stocks gyrated for a few days before settling down to tiny moves this week.

Read the full story: Fed holds key interest rate steady amid most dissents since 2014 »

“If we had not received these mixed messages, I don't think anybody would have been surprised,” said Sam Stovall, U.S. equity strategist for S&P Capital IQ.

The Dow Jones industrial average advanced 163.74 points, or 0.9%, to 18,293.70. The Standard & Poor's 500 index climbed 23.36 points, or 1.1%, to 2,163.12. The Nasdaq composite rose 53.83 points, or 1%, to a record 5,295.18.

Oil prices jumped as fuel stockpiles shrank and investors hoped supply gluts were easing, which would allow prices to rise. The Energy Information Administration said oil inventories dropped by 6.2 million barrels and gasoline inventories decreased by 2.5 million barrels last week.

S&P Global Platts says analysts expected oil inventories to grow and gasoline stockpiles to shrink by a smaller amount.

Benchmark U.S. crude rose 2.9% to $45.34 a barrel in New York. Brent crude, used to price international oils, rose 2.1% to $46.83 a barrel in London. That helped energy companies. Anadarko Petroleum shares rose 4.8% to $61.06 and Chevron advanced 2% to $99.63.

The Fed ruling boosted dividend-paying companies while bond prices changed course and moved higher. The yield on the 10-year Treasury note fell to 1.66% from 1.69%.

Adobe Systems climbed 7.1% to $107.78 after the software maker raised its forecasts for the year and reported solid third-quarter results. FedEx boosted its forecasts for the year as it projected a record holiday season, and the shipping company posted better first-quarter results than analysts had expected. The stock rose 6.9% to $173.86.

Japan's central bank made some technical changes that give it more influence over long-term interest rates. It said it would keep trying to stimulate the Japanese economy until inflation is higher than 2% a year, but it didn't reduce interest rates any further. Some analysts thought the central bank would take further steps to bolster economic growth, which would have weakened the yen. The dollar fell to 100.44 yen from 101.84 yen.

Student lender Navient fell 3.7% to $13.28 after federal regulators began investigating one of its shareholders. The Securities and Exchange Commission said hedge fund manager Leon Cooperman and Omega Advisors illegally traded on insider information by buying shares of a natural gas company before it sold a natural gas facility, which sent its stock soaring. Cooperman denied the charges.

Microsoft climbed 1.7% to $57.76 after it said it will buy back $40 billion in stock and raised its quarterly dividend. Target rose 1.2% to $69.47 after it said it plans to buy back $5 billion in stock.

Wholesale gasoline rose 3 cents, or 2.5%, to $1.40 a gallon. Heating oil rose 2 cents, or 1.7%, to $1.43 a gallon. Natural gas rose 1 cent to $3.06 per 1,000 cubic feet.

The euro rose to $1.1180 from $1.1157.

Gold rose $13.20, or 1%, to $1,331.40 an ounce. Silver rose 49 cents, or 2.5%, to $19.77 an ounce. Copper fell 1 cent to $2.16 a pound.

Germany's DAX rose 0.4% and the FTSE 100 of Britain advanced 0.1%. France's CAC 40 climbed 0.5%. Tokyo's Nikkei 225 reversed an early loss and closed up 1.9%. The Hang Seng of Hong Kong rose 0.6% and South Korea's Kospi rose 0.5%. 

MORE BUSINESS NEWS

Viacom shake-up continues; interim CEO Tom Dooley is out

If Donald Trump loses the election, launching a TV network won't be an easy plan B

Government paves way for driverless cars to hit the roads


UPDATES:

2:25 p.m.: This article was updated with closing prices and additional information.

11:45 a.m.: This article was updated with the Federal Reserve’s decision, more recent market information and additional details.

This article was originally published at 8:20 a.m.

Copyright © 2016, Los Angeles Times
71°