Wall Street posts modest gain as Fed signals rates to hold for some time


(Reuters) – Wall Street’s main stock indexes ended modestly higher on Wednesday after the U.S. Federal Reserve held interest rates steady and signaled that borrowing costs are likely to remain unchanged indefinitely.

FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., December 21, 2016. REUTERS/Andrew Kelly/File Photo

The U.S. 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 1.50% and 1.75%, 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.”

The Fed’s move to ease monetary policy this year has supported the rise in stocks to record highs; the S&P 500 has gained 25% so far in 2019.

With the Fed expected to stand pat on rates this time, investors have been more focused on U.S.-China trade relations, including new tariffs on Chinese goods. President Donald Trump has said the new tariffs will go into effect on Dec. 15, but uncertainty remains over whether they will be implemented.

“There was really nothing to take away from the narrative which has taken the stock market higher, which is the Fed has lowered rates three times this year. So we are in a pretty good interest rate environment to hopefully help the growth rate,” said James Ragan, director of wealth management research at D.A. Davidson in Seattle. “The focus will be back on trade here after today.”

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 U.S. consumer prices increased solidly in November.

The Dow Jones Industrial Average .DJI rose 29.37 points, or 0.11%, to 27,911.09, the S&P 500 .SPX gained 9.1 points, or 0.29%, to 3,141.62, and the Nasdaq Composite .IXIC added 37.87 points, or 0.44%, to 8,654.05.

Most S&P 500 sectors finished positive, with materials .SPLRCM and technology .SPLRCT leading the way.

In company news, Home Depot Inc (HD.N) shares fell 1.8% as the home improvement chain forecast fiscal 2020 sales below Wall Street expectations. Home Depot shares were the biggest drag on the Dow, keeping the blue chip index’s gain relatively slim.

American Eagle Outfitters Inc (AEO.N) shares dropped 6.5% after the apparel retailer forecast holiday-quarter profit and comparable sales below market expectations.

Advancing issues outnumbered declining ones on the NYSE by a 1.88-to-1 ratio; on Nasdaq, a 1.32-to-1 ratio favored advancers.

The S&P 500 posted 27 new 52-week highs and one new low; the Nasdaq Composite recorded 97 new highs and 58 new lows.

About 6.3 billion shares changed hands in U.S. exchanges, below the 6.7 billion daily average over the last 20 sessions.

Reporting by Lewis Krauskopf in New York; Additional reporting by Saqib Iqbal Ahmed and Herb Lash in New York, Shreyashi Sanyal and Arjun Panchadar in Bengaluru; Editing by Tom Brown and Leslie Adler

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