The Dow Jones Industrial Average (DJI) jumped 1.3% or 227.11 points to close at 18,076.19. The Standard & Poor’s 500 (S&P 500) gained 1.2% to 2,099.50. The tech-laden Nasdaq Composite Index closed at 4,982.83; rising 0.9%. The fear-gauge CBOE Volatility Index (VIX) plunged 10.8% to settle at 13.97. A total of about 4.1 billion shares were traded on Wednesday on the NYSE. Advancers outpaced declining stocks on the NYSE. For 80% stocks that advanced, 18% declined.
The unexpectedly dovish stance of the Federal Reserve helped benchmarks close higher on Wednesday. The FOMC meeting that concluded on Wednesday indicates a gradual pace of rate hikes. The Fed’s “dot plot” that tracks what Fed officials think rates should be at the end of the year, saw the median “dot” declining from 1.125% in December to 0.625% at this meeting. The median dot for next year also decreased from 2.5% in December to 1.875% in March.
Meanwhile, in a unanimous vote Fed officials dropped the “patient” phrase from the policy statement, indicating a possible rate hike in the next couple of months. Federal Reserve Chairwoman Janet Yellen told reporters that a possible rate hike in June can’t be ruled out. However, the Fed emphasized that change in its policy statement doesn’t mean it has decided on the timing of a rate hike. The central bank noted that a rate hike was “unlikely” in April and cautioned that it will only hike rates if it has “seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term.”
The Fed’s go-slow approach to raise rates came in the backdrop of a slowdown in economic growth in early 2015. The Fed said economic growth “moderated somewhat” following its December’s view of economic activity increasing at a solid pace. The central bank trimmed its growth forecast for 2015 to 2.3-2.7% from an earlier forecast of 3%. At the same time the apex bank raised concerns that inflation measures were short of expectations, mostly due to slump in energy prices.
Ahead of the Fed statement, investors were selling income generating stocks including utilities on anticipation of an imminent hike in short term interest rates. However, the Fed’s move to open the door for a rate hike helped these stocks end in the green. The Utilities Select Sector SPDR (XLU) gained 2.7%, the second highest gainer among the S&P 500 sectors. Key stocks from the sector including The AES Corporation (AES), Duke Energy Corporation (DUK), Ameren Corporation (AEE) and Southern Company (SO) increased 3.7%, 1.8%, 2.3% and 1.9%, respectively.
Meanwhile, energy shares moved north following a rise in oil prices. Crude oil prices ended a six session losing streak after the Fed reduced its growth outlook and the dollar weakened. The dollar weakened on the heels of the Fed statement that indicated a more cautious approach towards raising interest rates. The prices of WTI crude oil and Brent crude oil increased 2.7% and 4.3% to $44.66 per barrel and $55.91 a barrel, respectively.
The Energy Select Sector SPDR (XLE) gained 2.9%, the highest among the S&P 500 sectors. Dow components Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) gained 2.4% and 3.4%, respectively. Other energy stocks such as EOG Resources, Inc. (EOG), Kinder Morgan, Inc. (KMI) and Chesapeake Energy Corporation (CHK) increased 4.5%, 1.8% and 2.3%, respectively. Overall, all 10 sectors of the S&P 500 ended in the green.
In earnings news, shares of Oracle Corporation (ORCL) went up 2.9% a day after the company reported third-quarter fiscal 2015 earnings of 65 cents that beat the Zacks Consensus Estimate by a penny. Oracle’s board of directors also raised its quarterly dividend to 15 cents from the existing 12 cents per share.
On the other hand, shares of FedEx Corporation (FDX) fell 1.4% despite posting third-quarter fiscal 2015 earnings of $2.01 per share that beat the Zacks Consensus Estimate of $1.88. However, the company’s revenues of $11.72 billion fell short of the Zacks Consensus Estimate of $11.85 billion. Shares of Adobe Systems Incorporated (ADBE) also declined 3.5% after the company reported first-quarter fiscal 2015 earnings of 27 cents per share, in line with the Zacks Consensus Estimate. Adobe’s revenues of $1.11 billion were above the Zacks Consensus Estimate of $1.076 billion. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AES CORP (AES): Free Stock Analysis Report DUKE ENERGY CP (DUK): Free Stock Analysis Report AMEREN CORP (AEE): Free Stock Analysis Report SOUTHERN CO (SO): Free Stock Analysis Report EXXON MOBIL CRP (XOM): Free Stock Analysis Report CHEVRON CORP (CVX): Free Stock Analysis Report EOG RES INC (EOG): Free Stock Analysis Report KINDER MORGAN (KMI): Free Stock Analysis Report CHESAPEAKE ENGY (CHK): Free Stock Analysis Report ORACLE CORP (ORCL): Free Stock Analysis Report FEDEX CORP (FDX): Free Stock Analysis Report ADOBE SYSTEMS (ADBE): Free Stock Analysis Report To read this article on Zacks.com click here.
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