Dow Jones Industrial Average Closes Higher After Federal Reserve Keeps Interest Rates Unchanged, Signals September Liftoff

U.S. stocks closed higher Wednesday after the Federal Reserve kept interest rates unchanged. Rates have hovered at historic lows since the financial crisis began in 2008, but the central bank provided clues Wednesday about when it may lift rates for the first time in nearly a decade.

Wednesday’s gains were led by the utilities sector.

The Dow Jones Industrial Average (INDEXDJX:.DJI) gained 31.26 points, or 0.17 percent, to close at 17,935.74. The Standard & Poor’s 500 index (INDEXNASDAQ:.IXIC) added 4.15 points, or 0.2 percent, to end at 2,100.44. The Nasdaq composite (INDEXSP:.INX) rose 9.33 points, or 0.18 percent, to finish at 5,064.88.

Fed officials left their interest rate projections for this year unchanged, signaling the central bank is still on course for a September liftoff.

“This would allow time for inflation to start picking up, now that energy prices have stabilized, and for another couple of months of improvement in the labor market,” Gus Faucher, senior macroeconomist at PNC Financial Services Group, said in a research note Wednesday.

Paul Ashworth, chief U.S. economist at Capital Economics, agrees. The 0.63 percent median of policymakers' projections implies the Fed “will raise rates twice this year -- presumably at the September and December meetings, which have scheduled press conferences and forecast updates,” Ashworth said in a note.

Interest rates are currently at 0.25 percent.

Fed Chair Janet Yellen said at her press conference that too much attention is being placed on the timing of the Fed’s first hike and what should matter to market participants is the central bank’s trajectory of monetary policy. Yellen also warned that delaying action to tighten monetary policy until U.S. employment and inflation reach the central bank’s targets would risk overheating the economy, but added that raising rates too early could risk derailing the recovery.

Fed officials did revise down their projections for gross domestic product growth this year to between 1.8 percent and 2 percent, from 2.3 percent to 2.7 percent. However, those revisions were balanced by a much more upbeat assessment of the economy's performance in the accompanying statement, suggesting that they mainly reflect the unexpected weakness in the wintry first quarter.

“If the Fed believes the economy is strengthening and is on a positive trajectory, that would just give them more ammunition to raise rates before the end of the year, probably in the September- October time frame,” said Jeff Kravetz, regional investment director at U.S. Bank Wealth Management.

The Fed statement noted that activity appeared to be expanding "moderately" and that the pace of job gains picked up. Importantly, it argued that labor market slack had "diminished somewhat," whereas the statement in April suggested slack had been "little changed."

Dow component Procter & Gamble Co. (NYSE:PG) led the blue-chip index higher Wednesday, adding more than 1 percent. Credit card issuer American Express Company (NYSE:AXP) and chipmaker Intel Corporation (NASDAQ:INTC) rose 1.2 percent and 1 percent, respectively.

The S&P 500 utilities sector gained nearly 1 percent, led by a nearly 4 percent gain from energy holding company NiSource Inc. (NYSE:NI).