Stocks brushed off a muted start on Wall Street and notched modest gains Wednesday after the Federal Reserve reaffirmed that it is prepared to cut interest rates if needed to shield the U.S. economy from trade conflicts or other threats.
In a widely expected move, the central bank’s policymakers decided to leave the Fed’s benchmark interest rate unchanged. Still, by signaling the possibility of lower rates, the Fed reassured investors who have been worried that the trade war between Washington and Beijing could weigh on global economic growth, and by extension, corporate profits.
The reaction to the Fed’s midafternoon statement was more pronounced in the bond market, where the yield on the 10-year Treasury note slid to 2.03%, its lowest level since November 2016. The move signals that bond traders see an increased likelihood that the Fed will lower rates. Investors are betting on at least one interest rate cut this year, possibly as early as July.
The latest gain extended the market’s winning streak to a third day, adding to a June rebound in stocks after a dismal sell-off in May.
The S&P 500 rose 8.71 points, or 0.3%, to 2,926.46. The broad market index is within striking range of its all-time high, set on April 30.
The Dow Jones Industrial Average gained 38.46 points, or 0.1%, to 26,504. The Nasdaq composite added 33.44 points, or 0.4%, to 7,987.32. The Russell 2000 index of smaller companies picked up 5.35 points, or 0.3%, to 1,555.58.
Major stock indexes in Europe finished mixed.
Most analysts say they think economic growth has slowed sharply in the April-June quarter to around a 1.5% percent annual rate, only half the pace of the past year. The Fed’s statement came a day after the head of the European Central Bank said it was ready to cut interest rates and provide additional economic stimulus if necessary.
The biggest issue looming over the market remains the U.S. trade war with China. Stocks opened the week higher and rallied on Tuesday after President Donald Trump said he plans to meet with China’s president at the end of the month to discuss their ongoing trade war. The announcement injected some hope into a market that has been volatile because of concerns over the trade dispute
Health care stocks drove much of the market’s gains Wednesday. Allergan climbed 6.2% and UnitedHealth Group rose 1.8%.
Technology stocks rose, with software maker Adobe leading the way with a 5.2% gain on solid profit results. Household goods makers also notched gains. Kraft Heinz added 2.3%.
Utilities, which tend to rise when bond yields decline, also rose. Edison International gained 2.8%.
Financial companies, including banks, were the biggest laggards. The sector is sensitive to the moves in the bond market. Lower bond yields pull down the interest rates that banks charge on loans. Synchrony Financial dropped 1.7%.
The 10-year Treasury yield has been declining steadily since hitting a high of 3.23% last November. It fell to 2.03% Wednesday, down from 2.06% late Tuesday.
Benchmark crude oil fell 0.3% to settle at $53.76 a barrel. Brent crude oil, the international standard, fell 0.5% to close at $61.82 a barrel. Wholesale gasoline rose 0.8% to $1.74 per gallon. Heating oil climbed 0.1% to $1.83 per gallon. Natural gas fell 2.2% to $2.28 per 1,000 cubic feet.