Wall Street gains modestly after Fed signals rates to hold steady for some time

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The Federal Reserve held interest rates steady on Wednesday and signaled borrowing costs are likely to remain unchanged indefinitely.
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Fed chairman Jerome Powell holds a news conference after the Federal Open Market Committee meeting. PHOTO: EPA-EFE

NEW YORK (REUTERS) - Wall Street's main stock indexes moved modestly higher on Wednesday (Dec 11) after the US Federal Reserve held interest rates steady and signalled that borrowing costs are likely to remain unchanged indefinitely.

The US central bank said moderate economic growth and low unemployment are expected to continue through next year's presidential election.

After cutting rates three times earlier this year, the Fed left its benchmark rate at the target range of between 1.5 per cent and 1.75 per cent, a decision that was widely expected.

"You are looking at a cautiously optimistic Fed," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

"The tone that you see through the statement and projections suggest that they believe that they have taken out enough insurance to prevent a downturn."

With the Fed expected to stand pat on rates, investors have been more focused on US-China trade relations, including new tariffs on Chinese goods that could go into effect on Dec. 15.

"Assuming we don't see the tariffs going up, the developments this week, specifically the Fed decision to sit on its hands and its outlook for 2020 should be positive for the stock market," said Kristina Hooper, chief global market strategist at Invesco in New York.

Fed policymakers said they would continue monitoring "global developments" in deciding whether interest rates need to change.

They also said they would keep an eye on "muted inflation pressures," a reflection of concern that the pace of price increases has failed to hit the central bank's target.

Data on Wednesday did show US consumer prices increased solidly in November.

The Dow Jones Industrial Average rose 25.4 points, or 0.09 per cent, to 27,907.12, the S&P 500 gained 10.26 points, or 0.33 per cent, to 3,142.78 and the Nasdaq Composite added 37.59 points, or 0.44 per cent, to 8,653.77.

Most S&P 500 sectors were higher, with materials and technology leading the way.

The S&P 500 has gained 25 per cent so far in 2019, as stocks have hit record highs.

In company news, Home Depot Inc shares fell 1.8 per cent as the home improvement chain forecast fiscal 2020 sales below Wall Street expectations.

American Eagle Outfitters Inc shares dropped 6.5 per cent after the apparel retailer forecast holiday-quarter profit and comparable sales below market expectations.

Advancing issues outnumbered declining ones on the NYSE by a 1.76-to-1 ratio; on Nasdaq, a 1.25-to-1 ratio favoured advancers.

The S&P 500 posted 25 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 86 new highs and 53 new lows.

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