U.S. stocks briefly touched session highs on Wednesday after the Federal Reserve said it would keep borrowing costs near zero for an extended period even though it expressed confidence the U.S. economic recovery was gaining momentum.
The Fed kept its benchmark federal funds rate unchanged in a range of zero to 0.25 percent, as expected, and said the economy has continued to pick up since its last policy meeting in September.
It was expected, absolutely expected. Nobody thought the Fed was going to raise interest rates. The unemployment rate is too high. There is no sense of any inflation anywhere, now or in the future, said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.
The Fed's closely watched policy statement was somewhat more upbeat than its statement in September. However, it was also more explicit about why it expects to keep rates low, citing low rates of resource utilization, subdued inflation trends, and stable inflation expectations.
It's a very positive statement, Springer added. The longer the Fed can keep interest rates low, the better it is for the economy.
The Dow Jones industrial average <.DJI> advanced 98.09 points, or 1 percent, to 9,870.00, after rising 1.4 percent following the Fed's statement. The Standard & Poor's 500 Index <.SPX> gained 7.27 points, or 0.70 percent, to 1,052.68. The Nasdaq Composite Index <.IXIC> added 4.68 points, or 0.23 percent, to 2,062.
In the hour following the FOMC statement, the S&P 500 rose as high as 1,061.00 and the Nasdaq touched 2,081.00. With less than 30 minutes before the closing bell, though, those late-day gains began to fade somewhat.
The healthcare sector jumped on hopes the Obama administration's healthcare reforms may be slowed after Republicans scored some key election victories.
The Morgan Stanley Healthcare Payor index <.HMO> jumped 5.6 percent, while the S&P Healthcare index <.GSPA> rose 1.8 percent.
Healthcare stocks also got a lift from Wellcare Health Plans Inc
Wall Street opened higher after a private-sector report from ADP showed signs of improvement in the labor market. The three major U.S. stock indexes extended gains following a strong reading on the U.S. services sector from the Institute for Supply Management.
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)