Fed Comments Power US Markets To New Records

US stocks hit new highs on Wednesday after the Federal Reserve predicted a fast economic recovery from the coronavirus pandemic and said it would maintain its interest rate at close to zero.

The Dow Jones Industrial Average finished up 0.6 percent at 33,015, its first-ever close above 33,000.

The S&P 500 also posted a record after gaining 0.3 percent to end at 3,974, while the Nasdaq Composite Index climbed 0.4 percent to 13,525.

In its statement following its two-day policy meeting, the Fed projected a rapid jump in US economic growth and inflation this year as the Covid-19 crisis winds down, and repeated its pledge to keep its target interest rate near zero for years to come.

Wall Street extended gains after Fed Chair Jerome Powell said during a news conference that it's too early to discuss tapering off measures to support the struggling economy.

"The Fed statement today was more optimistic than some expected, they raised their outlook for both economic growth and the labour market. The market’s view of the statement is that it was fairly optimistic," said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

A US$1.9 trillion spending stimulus and the rollout of vaccines have fueled a rotation into so-called value stocks that are viewed as likely to outperform as the economy recovers from the coronavirus pandemic.

At the same time, worries that the stimulus could overheat the economy and lead to higher inflation rates have triggered a strong rise in long-duration Treasury yields and made technology and other growth stocks less attractive.

Following the Fed's statement, the yield on 10-year Treasuries ticked lower to 1.6374 percent.

Amazon rose 2 percent and gave the greatest lift to the S&P 500, while Apple's 0.6 percent decline weighed the index down more than any other stock.

The S&P 500 and the Dow on Monday reached all-time closing highs while the Nasdaq has recovered more than half of its losses following a selloff in late February and early March. (Reuters, AFP)