US: Stocks jump as Fed view of US improves

[NEW YORK] Wall Street stocks finished solidly higher on Wednesday after the Federal Reserve kept interest rates near zero and modestly upgraded its US economic outlook.

The Dow Jones Industrial rose 198.09 points (1.13 per cent) to 17,779.52.

The broad-based S&P 500 jumped 24.46 (1.18 per cent) to 2,090.35, while the tech-rich Nasdaq Composite Index gained 65.55 (1.30 per cent) at 5,095.69.

Trade was choppy after the Fed policy statement in the afternoon, with stocks briefly going negative on hints of a possible interest rate hike in December. But markets later rallied, ending the day firmly higher.

Art Hogan, chief market strategist at Wunderlich Securities, said investors were encouraged by changes in the Fed view. Wednesday's statement suggested the US central bank was less worried than in September of a big US hit from slower growth in China and other emerging economies.

"People should see good news as good news," Mr Hogan said.

But Chris Low, chief economist at FTN Financial, said the changes in the Fed's language were "minor" and that the odds of a December rate hike have not significantly improved.

"As Yellen likes to say, every meeting is on the table," Mr Low said. "That does not make it likely, however." Large banks, which would see higher profits if interest rates are increased, rose sharply. Dow member JPMorgan Chase gained 2.9 per cent, Bank of America 5.4 per cent and Citigroup 4.0 per cent.

Apple jumped 4.1 per cent after reporting that fiscal fourth-quarter profits rose 31 per cent to US$11.1 billion behind a 22 per cent increase in revenue to US$51.5 billion. Analysts said the tech giant's results in China were particularly encouraging.

American International Group jumped 4.9 per cent after activist investor Carl Icahn announced he had taken a large stake in the insurer and called on it to break up into three companies.

Rite Aid dropped 7.0 per cent and Walgreens Boots Alliance lost 10.7 per cent a day after the announcement of Walgreen Boot's US$17.2 billion takeover of Rite Aid. Questions about US antitrust regulatory approval dominated a Walgreens Boots conference call.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.09 per cent from 2.04 per cent Tuesday, while the 30-year advanced to 2.87 per cent from 2.86 per cent. Bond prices and yields move inversely.

AFP