The U.S. dollar slid and equities surged on Wednesday, fueled at first by Boeing and Apple’s results and later by the Federal Reserve pledging to be patient with future interest rate hikes, a change in tone stock investors interpreted as a buy signal.
The Fed held interest rates steady at the end of a two-day meeting in which it struck language in a December policy statement that projected “some further” rate hikes would be appropriate in 2019.
U.S. stocks extended their gains and bond yields fell as markets got what they were hoping for, said Mohamed El-Erian, chief economic adviser at Allianz in Newport Beach, California.
“This marks a full 180 from what the Fed was signaling just a few months ago,” El-Erian said.
Scott Minerd, global chief investment officer at Guggenheim Partners in Santa Monica, California, said the Fed’s pause will further extend the economic expansion, allowing excesses to continue to build and increasing risks of financial instability.
“The Fed refilled the punch bowl and the party goes on. Buy risk assets,” Minerd said.
The MSCI world equity index, which tracks share performance in 47 countries, rose 1.39 per cent following gains in Asia overnight. The FTSEurofirst 300 index of leading shares in Europe closed up 0.41 per cent.
Canada’s main stock index jumped higher with the Fed announcement on Wednesday, as energy shares were boosted by gains in oil prices.
The Toronto Stock Exchange’s S&P/TSX composite index closed unofficially up 21.41 points, or 0.14 per cent, at 15,484.55.
The energy sector edged jumped 1 per cent. Imperial Oil Ltd. rose 1.8 per cent, while Canadian Natural Resources Ltd. was up 1.2 per cent.
Leading the index were Precision Drilling Corp., up 13.9 per cent after announcing a debt repayment plan, Labrador Iron Ore Royalty Corp., up 12.5 per cent, and Ivanhoe Mines Ltd., higher by 8.8 per cent.
Lagging shares were Nexgen Energy Ltd., down 6.9 per cent, Cameco Corp., down 3.2 per cent, and CI Financial Corp., lower by 2.5 per cent.
In New York, the Dow Jones Industrial Average rose 436.5 points, or 1.78 per cent, to 25,016.46, the S&P 500 gained 41.36 points, or 1.57 per cent, to 2,681.36 and the Nasdaq Composite added 154.79 points, or 2.2 per cent, to 7,183.08.
Upbeat results from Boeing and Apple late on Tuesday provided investors early relief as they awaited the Fed statement and as U.S.-China trade talks started in Washington.
Boeing shares jumped after the world’s largest planemaker raised its profit and cash flow expectations for 2019 amid a boom in air travel. Boeing also indicated it had overcome supplier delays that snarled 737 production last year.
Apple results provided some reassurance as the iPhone maker reported sharp growth in its services business.
Boeing shares rose 6.25 per cent and Apple gained 6.8 per cent.
Oil prices rose, paring gains of more than 1 per cent, as the potential for supply disruptions following U.S. sanctions on Venezuela’s oil industry lifted prices.
Stocks listed in London jumped more than 1 per cent after British lawmakers late on Tuesday rejected a proposal in Parliament that aimed to prevent a potentially chaotic “no-deal” Brexit, a vote that initially pushed sterling sharply lower.
The exporter-heavy FTSE 100 in London rose 1.45 per cent as its components often are boosted by a weaker pound because its multinational companies earn a large portion of their revenue abroad in foreign currency.
Sterling rose 0.04 per cent to $1.3071 after sliding about 0.7 per cent against the dollar and the euro following parliamentary votes on Brexit.
“The vote is not fundamentally changing the way the market’s talking about Brexit,” said Hetal Mehta, Legal & General Investment Management senior European economist.
Payrolls processor ADP reported that the U.S. private sector added 213,000 jobs in January, which beat forecasts for gains of 178,000. But the monthly total was lower than the 271,000 jobs added in December.
The dollar index fell 0.50 per cent to 95.343. Against the yen, the dollar fell 0.44 per cent to 108.90.
The euro gained 0.53 per cent to $1.1491.
Benchmark 10-year U.S. Treasury notes rose 4/32 in price to push yields down to 2.6954 per cent.
Oil prices rose on Wednesday, as U.S. government data that showed signs of tightening supply and investors remained concerned about supply disruptions following U.S. sanctions on Venezuela’s oil industry.
U.S. crude futures rose 92 cents to settle at $54.23 a barrel, a 1.73 per cent gain. Brent crude futures gained 33 cents, or 0.54 per cent, to $61.65 a barrel.
Prices extended gains after government data showed U.S. crude oil stockpiles rose less than expected last week due to a drop in imports, while gasoline inventories fell from record highs as refiners slowed production.
Crude inventories rose by 919,000 barrels, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for an increase of 3.2 million barrels.
After eight straight weeks of builds to a record high, gasoline stocks fell 2.2 million barrels last week, versus forecasts for a 1.9 million-barrel gain.
“The report looked supportive on several fronts with the most obvious being a smaller-than-expected crude build of less than 1 million barrels,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. “While the slight increase may not appear monumental, we will reiterate that the build compared with 5-year average increases of about 7.5 million barrels.”