US: Federal Reserve signals on inflation send Wall Street higher

[NEW YORK] Wall Street swung to positive finish on Wednesday, with stocks boosted by Federal Reserve minutes which said the central bank may be willing to let inflation run slightly higher.

The release of the minutes saw the major stock indices change direction, turning positive after what had been a day spent mostly in the red.

Meanwhile, General Electric had its worst day in nearly a decade, weighing heavily on the benchmark Dow Jones Industrial Average, apparently after CEO John Flannery reportedly forecast no growth in GE's power business and left investors with doubts about the company's current dividend.

Markets sagged early Tuesday over persistent geopolitical and trade war fears after President Donald Trump said he was dissatisfied with trade talks with China and cast doubt that a June summit with North Korea would go ahead.

But equities reversed course late in the session, with the Dow gaining 0.2 per cent to close at 24,883.85, while the broader S&P 500 added 0.3 per cent, settling at 2,733.15.

The tech-heavy Nasdaq jumped 0.6 percent, finishing at 7,425.70.

Investors have been spooked repeatedly since February by the prospect rising inflation could cause prompt the Fed to raise interest rates faster than expected this year.

But while the Fed signaled its second rate hike of the year will likely come early next month, it also said it could allow inflation to modestly overshoot its two percent target - so long as that increase was only "temporary." Maris Ogg of Tower Bridge Advisors told AFP the minutes gave markets a little bit of certainty about the path of monetary policy.

"There is often a relief when this report is behind you," she said. "Most people recognise now that we will probably get three more rate hikes this year and probably you get uncertainty out of the way."

General Electric shares sank 7.26 per cent, closing at US$14.18, the lowest price since 2009. The falling share price followed a presentation by Flannery, who reportedly revealed the market for gas turbines will see little movement through 2020 and he hesitated to endorse the current 48-cent dividend.

AFP