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Stocks jump after Fed indicates patience on interest rate increases

Stocks jump after Fed indicates patience on interest rate increases
Trader Jonathan Mueller works in a booth on the floor of the New York Stock Exchange on Dec. 7. (Richard Drew / Associated Press)

U.S. stocks jumped Wednesday after the Federal Reserve signaled it could hold off on interest rate increases in the coming months, citing muted inflation.

The central bank’s announcement allays one of the biggest concerns for investors: that the economy, and corporate profits, could be hurt if the Fed continued to steadily increase interest rates after raising them four times last year.

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“The Fed gave the market everything it wanted in terms of a dovish message,” said Willie Delwiche, investment strategist at Baird. “Now it’s saying, ‘Maybe there will be rate hikes, maybe there won’t be.’ ”

Technology companies drove the broad rally, which snapped the market’s two-day losing streak. The benchmark Standard & Poor’s 500 index is now on track to end January with its biggest monthly gain in more than three years, and the gains pushed the Dow Jones industrial average above 25,000 points for the first time since early December.

Even before the Fed announcement, stocks rose as traders welcomed positive results and outlooks from several big companies, including Boeing. The aerospace giant soared after blowing away analysts’ earnings forecasts and saying its annual revenue topped $100 billion for the first time.

The S&P 500 index rose 41.05 points, or 1.6%, to 2,681.05. The Dow gained 434.90 points, or 1.8%, to 25,014.86. The gain in Boeing’s stock accounted for about a third of the Dow’s rise.

The tech-heavy Nasdaq composite jumped 154.79 points, or 2.2%, to 7,183.08. The Russell 2000 index of smaller companies ticked up 15.49 points, or 1.1%, to 1,486.94. The Russell is up more than 10% this month.

Jitters over the U.S.-China trade war, uncertainty over the path of interest rates and signs of a weakening global economy helped knock the market into a steep slump in December that pushed the S&P 500 down 9.2% that month. The market has since rebounded, and the index is on track to end January with a 7% gain. That would be the biggest monthly increase since October 2015.

Investors welcomed some encouraging corporate earnings reports Wednesday.

Boeing surged 6.3% to $387.72 after the company delivered more planes and racked up a significant amount of government contracts during the fourth quarter. Revenue surged 14% as the company delivered more commercial and military planes. Profit and revenue topped expectations.

Apple rose 6.8% to $165.25 after traders brushed off a slide in iPhone sales. The technology giant’s latest results met Wall Street’s diminished expectations.

Anthem, the nation’s second-largest health insurer, soared 9.1% to $297.56 on an upbeat forecast for 2019.

After the market closed, Facebook reported robust fourth-quarter earnings, revenue and user growth that handily beat Wall Street expectations despite heavy spending on safety and security, as well as its privacy scandals. Its profit of $6.9 billion, or $2.38 a share, was up 61% from a year earlier. Revenue increased 30% to $16.9 billion. And the social network’s user base grew 9% to 2.32 billion.

Facebook shares, which climbed 4.3% to $150.42 on Wednesday, jumped an additional 12% in after-hours trading.

Corporate earnings have so far been holding up in the face of the global slowdown and trade conflicts. About a quarter of the companies in the S&P 500 have reported results for the final three months of 2018. Of those, some 77% delivered earnings growth that topped Wall Street’s expectations. Some, though, are lowering expectations for 2019.

U.S.-China trade talks opened Wednesday and will loom over the market for the rest of the week. The high-level talks are aimed at settling a months-long trade war that has raised fears of slower economic growth. Industrial and technology companies have warned about slowing sales because of the trade impasse.

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U.S. bond prices rose. The yield on the 10-year Treasury fell to 2.67% from 2.71% late Tuesday.

U.S. crude oil rose 1.7% to $54.23 a barrel in New York. Brent crude, used to price international oils, rose 0.5% to $61.65 a barrel in London.

Wholesale gasoline rose 2.3% to $1.38 a gallon. Heating oil was little changed at $1.90 a gallon. Natural gas fell 1.7% to $2.85 per 1,000 cubic feet.

The dollar weakened to 108.92 yen from 109.28 yen. The euro rose against the dollar to $1.1492 from $1.1427.

Gold rose 0.1% to $1,309.90 an ounce. Silver rose 0.6% to $15.93 an ounce. Copper rose 1.6% to $2.77 a pound.

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