US stocks have surged after the Federal Reserve said it would be patient in lifting borrowing costs further this year, reassuring investors worried about a slowing economy.
Along with better-than-feared quarterly results from Apple, the Fed’s comments helped Wall Street reverse two down days triggered by profit warnings from US bellwethers that signalled a bigger impact from a slowdown in China. The US central bank held interest rates steady, as widely expected.
While the Fed said continued US economic and job growth were still “the most likely outcomes,” it removed language from its December policy statement that risks to the outlook were “roughly balanced” and struck language that projected “some further” rate hikes would be appropriate in 2019. It also said it could alter the pace of its balance sheet reduction “in light of economic and financial developments”. The Fed’s balance sheet surged following the 2008 financial crisis, and many investors believe its effort to shrink it may stifle economic growth.
Investors in recent months have become more concerned about the global economy. US corporate results have shown companies including Apple, Intel Corp and Caterpillar Inc are feeling pain from the slowing expansion of China’s economy, which has been hurt by a trade conflict with the United States.
Apple shares jumped 6.83 per cent after the company reported a sharp growth in services business, easing concerns after the iPhone maker earlier this month cut current-quarter sales forecast. Boeing Co gained 6.25 per cent after the world’s largest plane-maker forecast full-year profit and cash flow above analysts’ estimates amid a boom in air travel and speedier 737 production.
Following the Fed’s rate announcement, all three main US stock indexes extended gains from earlier in the session and the S&P 500 closed at its highest since December 6. The Dow Jones Industrial Average was up 1.77 per cent at 25,014.86 points, while the S&P 500 had gained 1.50 per cent to 2,679.50 and the Nasdaq Composite added 2.2 per cent to 7183.08.
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