NEW YORK Stocks in major markets rose on Wednesday, led by Wall Street, and the U.S. dollar weakened after the Federal Reserve held interest rates steady while lowering expectations for the number of rate hikes this year.
The U.S. central bank noted that the U.S. economy continues to face external risks, but indicated that moderate U.S. economic growth would allow it to resume tightening monetary policy this year.
Fresh projections, however, point to two quarter-point rate hikes by year's end, from an expected four back in December.
The expectation for lower rates dragged the dollar lower and hurt stocks in the financial sector. But major U.S. indexes turned positive shortly after the Fed's statement, with basic materials and energy sector stocks leading the way as commodity prices rose.
The CBOE volatility index .VIX a gauge of what equity investors are willing to pay for protection against a drop on the S&P 500, was on track to close at its lowest since early December.
"The Fed struck a very dovish tone, marking down its projected rate increase trajectory, while noting overall resilience in the U.S. economy and the absence of inflation pressures," said Brian Dolan, head market strategist at DriveWealth LLC in New Jersey.
"This should be encouraging for risk sentiment and risk assets."
The Dow Jones industrial average .DJI rose 92.41 points, or 0.54 percent, to 17,343.94, the S&P 500 .SPX gained 10.41 points, or 0.52 percent, to 2,026.34 and the Nasdaq Composite .IXIC added 29.53 points, or 0.62 percent, to 4,758.20.
MSCI's gauge of equities in major world economies .MIWD00000PUS jumped 0.6 percent. Nikkei futures NKc1 were little changed, roughly at the same level as before the Fed statement.
The U.S. dollar fell sharply, with the euro up 0.9 percent and the yen JPY= sharply reversing an earlier loss versus the greenback.The dollar initially rose after data showed an increase in underlying U.S. inflation and the housing market continued to strengthen.
U.S. Treasury yields US10YT=RR turned negative after earlier having hit their highest in seven weeks. The 10-year note rose 6/32 in price to yield 1.9381 percent after briefly ticking above 2 percent for the first time since Jan 28.
Oil prices jumped after OPEC sources said oil producers, including Gulf OPEC members, support holding talks next month on freezing output even if Iran won't take part. The weaker dollar further boosted crude and other commodities.
U.S. crude CLc1 gained 6.2 percent to $38.60 a barrel, while Brent LCOc1 rose 4.3 percent to $40.41.
(Additional reporting by Gertrude Chavez Dreyfuss, Herbert Lash, Chuck Mikolajczak and Dion Rabouin; Editing by Meredith Mazzilli and Nick Zieminski)
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