By Pete Schroeder
WASHINGTON (Reuters) -U.S. stocks maintained gains Wednesday even after the Federal Reserve signaled an interest rate hike could be coming soon, while tension between Russia and Ukraine pushed oil prices to highs not seen since 2014.
All three major stock indices pared earlier gains but stayed in positive territory Wednesday afternoon after the Fed policy statement, with the tech-heavy Nasdaq leading the way with gains over 2%.
The Dow Jones Industrial Average rose 0.65%, the S&P 500 was up 1.30% and the Nasdaq Composite was up 2.19% shortly after the Fed released its statement.
The MSCI world equity index, which tracks shares in 45 nations, rose 1.14%.
In its latest policy update, the Fed signaled it is likely to raise U.S. interest rates in March and reaffirmed plans to end its bond purchases that month before launching a significant reduction in its asset holdings.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the U.S. central bank’s rate-setting Federal Open Market Committee said in a policy statement.
The Fed also said its policy-setting members had agreed on a set of principles for shrinking its balance sheet, set to start sometime after interest hikes begin. The Fed’s balance sheet roughly doubled in size during the pandemic to nearly $9 trillion, as it snapped up bonds to help keep longer-term interest rates down to support the economy.
“Anyone looking for a hawkish message or pivot didn’t get it. So that is giving the market some comfort that the plan that the market has adapted to and priced in is still in place,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.
Gains in U.S. stocks came after equities posted their worst week since 2020 last week. The MSCI index is also on course for its biggest monthly drop since the COVID-19 pandemic hit markets in March 2020, though analysts at Goldman Sachs said equities had not reached “danger zone” levels.
U.S. Treasury yields reversed a brief slide and began rising after the Fed statement. The benchmark U.S. 10-year yield climbed to 1.7940% shortly after the Fed statement..
OIL HITS SEVEN-YEAR HIGH
Growing tension as Russian troops massed on Ukraine’s border continued to push oil prices higher amid concerns of supply disruption, with oil reaching its highest levels in seven years
U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invaded Ukraine, as Western leaders stepped up military preparations and made plans to shield Europe from a possible energy supply shock.
Brent crude jumped 2.09% at $90.04 a barrel. U.S. crude was last up 2.11% at $87.41 per barrel.O/R]
“World inventories have continued to decline as producers have struggled to restore production to pre-pandemic levels,” said Andrew Lipow, president of Lipow Oil Associates in Houston. “Mix that in with geopolitical tensions between the United States and Russia over Ukraine and prices have continued their march upward.”
The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.17%, while spot gold prices fell 0.89% to $1,831.04 an ounce. [GOL/]
(Additional reporting by Lewis Krauskopf, Sujata Rao in London, Stella Qiu in Beijing and and Alun John in Hong Kong; Editing by Marguerita Choy and Alistair Bell)
