Stocks clambered higher Wednesday for their biggest gain in two weeks and easily absorbed the Federal Reserve’s latest increase in interest rates, a move that was widely expected.
What was perhaps unexpected was the big drop in bond yields and the dollar’s value against other currencies following the Fed’s announcement. The central bank stressed that it plans to move gradually and stuck to its projection that it will raise rates a total of three times this year. That cooled speculation among some investors that the Fed could move more aggressively.
The Standard & Poor’s 500 index jumped 19.81 points, or 0.8 percent, to 2,385.26. It had been up through the day, and the gains accelerated immediately after the Fed made its announcement.
The Dow Jones industrial average rose 112.73 points, or 0.5 percent, to 20,950.10. The Nasdaq composite picked up 43.23 points, or 0.7 percent, to 5,900.05. The Russell 2000 index of small-company stocks jumped 20.45 points, or 1.5 percent, to 1,382.83.
The yield on the two-year Treasury note, which is heavily influenced by changes in Fed policy, jumped on expectations for Fed action, for example. It climbed nearly a quarter of a percentage point in a little more than two weeks to 1.38 percent late Tuesday.
The yield on the 10-year Treasury fell to 2.49 percent from 2.60 percent late Tuesday, and the 30-year yield fell to 3.11 percent from 3.18 percent. Both remain higher than they were a few weeks ago, though.
The dollar’s value likewise sank as some traders got out of deals built on the expectation of a more aggressive Fed, said Nate Thooft, senior portfolio manager at Manulife Asset Management.
The dollar sank to 113.39 Japanese yen from 114.72 yen late Tuesday. The euro rose to $1.0713 from $1.0632, and the British pound climbed to $1.2301 from $1.2145.
The drop in bond yields shone a warm light on stocks in industries known for paying relatively big dividends. Lower bond yields make the income provided by dividends more attractive, and real-estate investment trusts in the S&P 500 jumped 1.9 percent. Utilities rose 1.6 percent.
The day’s biggest gains came from energy stocks. Those in the S&P 500 rose by 2.1 percent after the price of oil climbed Wednesday, the first time that’s happened in more than a week. A barrel of benchmark U.S. crude rose $1.14 to settle at $48.86. The 2.4 percent jump was the largest since January. Brent crude, which is used to price international oils, added 89 cents to $51.81 a barrel in London.
The weaker dollar also helped to lift prices for metals. Gold settled early in the afternoon at $1,200.70 per ounce, down $1.90. But it climbed following the Fed’s announcement and was trading at $1,221 late Wednesday. Silver and copper also rose following the announcement.
Natural gas rose 4 cents to settle at $2.98 per 1,000 cubic feet, heating oil rose 2 cents to settle at $1.51 per gallon and wholesale gasoline was virtually flat at $1.58 per gallon.
In overseas trading, the German DAX stock index rose 0.2 percent, the U.K. FTSE 100 index rose 0.1 percent and the CAC 40 in France was 0.2 percent higher. Japan’s Nikkei 225 stock index lost 0.2 percent, and South Korea’s Kospi was little changed. The Hang Seng in Hong Kong edged 0.1 percent lower.