NEW YORK – Global stock indexes and the U.S. dollar index mostly held gains while benchmark Treasury yields fell to two-week lows on Wednesday after the Federal Reserve left interest rates steady but left the door open to a further increase in borrowing costs.
The U.S. central bank announced in a policy statement that it had decided to hold the policy rate steady in its current 5.25% to 5.50% range for now.
The statement acknowledged the U.S. economy’s surprising strength, but also nodded to the tighter financial conditions faced by businesses and households.
Traders of short-term U.S. interest rates added to bets Wednesday that the Fed is done raising its policy rate and will start cutting rates by June.
“Hard to say if we are at the end of hikes. The Fed very much wants to keep the door open for additional hikes in December or next year,” said Ellen Hazen, chief market strategist, F.L Putnam Investment Management in Wellesley, Massachusetts.
Michael Brown, market analyst at Trader X in London, said “the ‘higher for longer’ policy stance remains in place.”
The Dow Jones Industrial Average rose 105.05 points, or 0.32%, to 33,157.92; the S&P 500 gained 21.24 points, or 0.51%, to 4,215.04; and the Nasdaq Composite added 95.61 points, or 0.74%, to 12,946.84.
The pan-European STOXX 600 index rose 0.67% and MSCI’s gauge of stocks across the globe gained 0.57%. Benchmark 10-year note yields were last at 4.801%, after dropping as far as 4.778%, the lowest since Oct. 17.
Earlier, Treasury yields slipped on Treasury Department plans to “gradually” boost the size of its debt auctions to meet financing needs.
The Treasury Department said the size of most auctions from November to January 2024 will increase and that it will need one additional quarter of increases to meet its funding plans.
The dollar index was last up 0.2% at 106.90. Against the yen, the dollar fell 0.5% to 151.06 yen.
The Japanese yen fell sharply on Tuesday, when the Bank of Japan tweaked its bond yield control policy, loosening its grip on long-term rates and pushing the currency to a one-year low against the dollar.
That was followed by a fresh and sterner warning from Japan’s top currency diplomat Masato Kanda on Wednesday that authorities stood ready to respond to recent “one-sided, sharp” moves in the currency.
Oil prices were last down after the Fed decision. Investors also were keeping a close eye on the latest developments in the Israel-Hamas conflict.
U.S. crude recently fell 0.51% to $80.61 per barrel and Brent was at $84.79, down 0.27% on the day.
(Reporting by Caroline Valetkevitch; additional Chuck Mikolajczak and Saqib Iqbal Ahmed in New York, Lawrence White in London, Ankur Banerjee in Singapore and Amruta Khandekar and Shashwat Chauhan in Bengaluru; Editing by Alison Williams and Mark Potter)
