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US: Stocks leap more than 1% on Fed rate hike
[NEW YORK] US stocks jumped more than one per cent after the Federal Reserve announced the first interest rate hike in nine years on Wednesday and promised a gradual approach to future rate increases.
The Dow Jones Industrial Average jumped 224.18 points (1.28 per cent) to 17,749.09.
The broad-based S&P 500 rose 29.66 (1.45 per cent) to 2,073.07, while the tech-rich Nasdaq Composite Index advanced 75.78 (1.52 per cent) to 5,071.13.
The Fed raised the benchmark federal funds rate, locked near zero for seven years to support recovery from the Great Recession, by a quarter point to 0.25-0.50 per cent, saying the economy is growing at a moderate pace and should accelerate next year.
Analysts praised the Fed for supplementing its first rate hike since June 2006 with a pledge to take a "gradual" approach to future increases.
"What the market appreciates is the word 'gradual,'" said Gregori Volokhine, president of Meeschaert Capital Markets. "There is no surprise here." "The markets were poised to go higher on the Fed decision if there was nothing surprising," said Michael James, managing director of equity trading at Wedbush Securities.
"The lack of any negative surprise is the reason the market is acting so well." Major banks gained. Bank of America rose 1.8 per cent and Citigroup 2.6 per cent. Both BofA and Wells Fargo were among the banks that announced they were hiking the prime lending rate to 3.5 per cent from 3.25 in the wake of the Fed's move.
Industrials were also strong. General Electric rose 2.2 per cent, Ford 3.5 per cent, Honeywell International 5.7 per cent and copper producer Freeport-McMoRan 2.6 per cent.
Valeant Pharmaceuticals International advanced 8.1 per cent despite slashing its fourth-quarter forecast. BMO Capital Markets said the projection was "probably conservative." CVS Health gained 5.4 per cent as it raised its 2016 profit forecast and announced a 21 per cent increase in its dividend.
Solar stocks rose in anticipation that a tax and budget bill winding through the US Congress would include an extension of key tax credits for renewable energy. SolarCity soared 34.1 per cent, SunEdison 25.5 per cent and First Solar 9.7 per cent.