US stocks rise as Fed gives cautious outlook

Fed chairman Janet Yellen responds to a question from the media during a press conference, March 16, 2016.
Fed chairman Janet Yellen responds to a question from the media during a press conference, March 16, 2016. PHOTO: EPA

NEW YORK (AFP) - Wall Street stocks climbed Wednesday after the US Federal Reserve kept interest rates unchanged and offered an outlook on the US economy that was less bullish than many expected.

The Dow Jones Industrial Average rose 74.23 points (0.43 per cent) to 17,325.76.

The broad-based S&P 500 climbed 11.29 (0.56 per cent) to 2,027.22, while the tech-rich Nasdaq Composite Index gained 35.30 (0.75 per cent) at 4,763.97.

In revisions to its December forecasts, the Fed’s policy body, the Federal Open Market Committee (FOMC), said it expects the US economy to grow only 2.2 per cent this year, compared with 2.4 percent previously.

Fed officials pulled back their expectations on rate increases in 2016 by about a half percentage point, seeing the benchmark federal funds rate at about 0.9 per cent by the end of the year, implying two rate hikes. In December they had projected the key rate at 1.4 per cent by end-2016, suggesting four hikes.

Fed Chair Janet Yellen, at a news conference following the two-day FOMC meeting, said the central bank took “a slightly more accommodative path,” given “soft” US business investment and weak exports in recent months, and the global slowdown and turmoil in world markets.

Most analysts said the overall tone from the FOMC and Yellen was more dovish than expected. However, IHS said the “stage is set” for a possible rate hike in June.

Banking shares fell, with Bank of America shedding 1.9 per cent, Citigroup 0.9 per cent and Goldman Sachs 1 per cent. Bank profits are boosted by higher rates.

Petroleum-linked shares advanced on a 5.8 per cent rise in US oil prices. ConocoPhillips rose 5.1 per cent, Halliburton 1.4 per cent and EOG Resources 1.9 per cent.

Other commodity-linked companies also gained. Aluminum producer Alcoa rose 6.3 per cent, US Steel jumped 8.2 per cent and Freeport-McMoRan 10.3 per cent.

Peabody Energy, the largest US coal miner, plummeted 45.4 per cent after it warned that it may be forced to seek bankruptcy protection after it missed a key debt payment.

Charter Communications rose 6 per cent following a Wall Street Journal report that the US Federal Communications Commission is moving towards approving its US$55 billion (S$75 billion) purchase of Time Warner Cable with some conditions. Time Warner Cable gained 3.3 per cent.

Oracle climbed 3.8 percent after the information technology company reported third-quarter earnings of 64 cents per share, two cents above expectations. Oracle also said its board had authorised up to US$10 billion in additional stock buybacks.