US Stocks Ascend After Fed Says Easy Money Will Continue

Wall Street indices climbed to records on Wednesday after the Federal Reserve upgraded its outlook for the world's largest economy and made clear its easy money policies will not end anytime soon.

Tech stocks had borne the brunt of recent investor jitters that a flood of government stimulus would cause inflation to move higher and force the Fed to raise rates sooner than expected.

But Fed Chair Jerome Powell soothed their concerns, saying at the conclusion of the two-day meeting of the bank's policy-setting committee that inflation and unemployment remain far from the Fed's targets and, by extension, rate hikes were not on the horizon.

"The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved," Powell said, promising that stimulus will remain in place "for as long as it takes."

Indices went solidly into the black after he spoke, with the Dow marking its first close above 33,000 points and the S&P 500 also hitting a record.

"The most important thing is that he is saying that the Fed is not going to act preemptively to avoid inflation," Gregori Volokhine of Meeschaert Financial Services said.

Prior to the Fed meeting, Frankfurt ended the day with a gain of 0.3 percent, Paris was flat and London shed 0.6 percent.

US benchmark 10-year Treasury yields -- a guide to future interest rate expectations -- have risen in recent weeks as anxiety mounts about higher inflation, further stirred by the $1.9 trillion stimulus package President Joe Biden signed last week.

That has caused equity investors to shift out of tech stocks, in particular hurting the Nasdaq, while other stocks that would benefit from a wider economic recovery have seen gains.

That dynamic continued even after Powell spoke, with the Nasdaq posting a slight gain and some tech stocks closing lower.

Disney finished 0.5 percent higher after announcing it was aiming to reopen Disneyland in California at limited capacity in late April.

In Europe, traders said there were also continuing concerns over AstraZeneca's Covid vaccine shot, which many EU countries have suspended pending results of a probe into blood clot incidents.

In a newspaper article Wednesday, the UK's health minister said the jab was safe and there was no evidence of a health risk.

Oil prices meanwhile dropped by more than one percent after a surprise build in US stockpiles, before regaining ground.

Oil markets and the world economy are recovering from the massive collapse in demand caused by the coronavirus pandemic, the International Energy Agency said in a report Wednesday.