The S&P/TSX composite index ran up 63.71 points, or 0.4 per cent, to 14,962.24. The Canadian dollar closed sharply higher as the greenback lost strength in the wake of the Fed’s rate announcement, gaining 1.28 cents (U.S.) to 79.55 cents.Mark Blinch/Reuters
North American stock markets enjoyed a solid lift Wednesday after the Federal Reserve suggested a less aggressive timeline for raising interest rates even as it opened the door for the first hike in almost a decade.
The S&P/TSX composite index ran up 63.71 points, or 0.4 per cent, to 14,962.24. The Canadian dollar closed sharply higher as the greenback lost strength in the wake of the Fed's rate announcement, gaining 1.28 cents (U.S.) to 79.55 cents.
U.S. indexes surged with the Dow Jones industrials ahead 227.11 points to 18,076.19, the Nasdaq up 45.4 points at 4,982.83 and the S&P 500 index 25.14 points higher at 2,099.42.
The S&P 500 has rallied 2.9 per cent since March 11 amid a rebound from a 3.6-per-cent drop in the seven sessions following the benchmark's March 2 all-time high. The declines came as concern mounted that a surging U.S. dollar will hurt corporate earnings and as oil slid more than 12 per cent.
The U.S. benchmark gauge now sits about 21 points from an all-time high reached March 2. The Russell 2000 index of small-cap companies has jumped 3.6 per cent to a record in the past week after dropping 2.8 per cent earlier this month.
The Fed dropped its pledge to be "patient" in deciding when to begin raising rates, but it cut its interest-rate projections over the next few years and downgraded its outlook for the U.S. economy.
While the statement put a June rate increase on the table, it also allowed the Fed flexibility to move later, stressing that any decision would depend on incoming data.
"They took April off the table, which leaves June or September," John Canally, chief economic strategist at LPL Financial Corp., which oversees $475.1 billion, said. "The statement about the economy softening a bit raises the market's awareness that the economy is under-performing where the Fed wants it to be, which pushes them out."
The central bank said it won't tighten until it is "reasonably confident" inflation will return to its target and the labour market improves further.
"What was unexpected is that their expectations for growth in the economy came down, as did their expectation for inflation," said Kevin Caron, a market strategist and portfolio manager who helps oversee $170-billion at Stifel Nicolaus & Co. in Florham Park, N.J. "They're also telling the market through these reduced expectations that the path for interest rates increases is going to be relatively shallow."
Officials lowered their median estimate for the federal funds rate at the end of 2015 to 0.625 per cent, compared with 1.125 per cent in December forecasts. The median estimate for the end of 2016 declined to 1.875 per cent from 2.5 per cent, according to the Federal Open Market Committee's quarterly Summary of Economic Projections.
U.S. short-term interest-rate futures contracts jumped, pushing expectations for the first rate hike farther into the future. Traders now see a 60-per-cent chance that the first Fed rate hike will come in October, based on CME FedWatch.
In Canada, most TSX sectors finished positive, with the energy sector ahead 2.6 per cent as oil prices erased early losses to move higher after six days of steep declines on supply concerns.
With files from Bloomberg and Reuters