Wall St edges up after Fed holds tight on rates

This file photo taken on Feb 16, 2017 shows a street sign near the New York Stock Exchange in New York.
This file photo taken on Feb 16, 2017 shows a street sign near the New York Stock Exchange in New York.PHOTO: AFP

NEW YORK (REUTERS) - US stocks added slightly to gains on Wednesday (July 26)after the Federal Reserve kept interest rates unchanged and said it expected to start winding down its massive holdings of bonds "relatively soon" in a sign of confidence in the US economy.

The US central bank's statement did not dramatically sway Wall Street's major indexes, which hit record highs earlier in the session on a busy day of corporate earnings reports.

As broadly expected by investors, the Fed maintained its benchmark lending rate and said it was continuing the slow path of monetary tightening.

In its statement following a two-day policy meeting, the Fed's rate-setting committee indicated the economy was growing moderately and job gains had been solid. But it noted that both overall inflation and a measure of underlying price gains had declined and said it would "carefully monitor" price trends.

"The statement was mildly more dovish than expected," said Omer Esiner at Commonwealth FX in Washington. "The Fed's assessment of the inflation backdrop amounted to a very modest downgrade of the overall inflation situation and could signal slightly more concern on the part of the Fed with respect to their forecast for inflation."

The Dow Jones Industrial Average rose 97.07 points, or 0.45 per cent, to 21,710.5, the S&P 500 gained 1.92 points, or 0.08 per cent, to 2,479.05 and the Nasdaq Composite added 7.11 points, or 0.11 per cent, to 6,419.29.

Telecommunications were the best performing sector, propelled higher by a 4.9 per cent gain in AT&T after its results.

Financials, which tend to perform better when interest rates rise, were off 0.4 per cent, holding losses from before the Fed announcement.

Following the statement, traders' bets that the Fed would raise rates at its December meeting stood at only 35 per cent, according to Thomson Reuters data. "They are, I don't want to use the word 'trapped' because the market has kind of bailed them out with one event or another, but they are in a tough spot here for the rest of 2017," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

"Even that last hike looks like it might be a difficult one to make."