U.S. shares, oil jump after Fed statement

NEW YORK (Reuters) - Stocks on Wall Street surged and oil prices jumped as much as 5 percent on Wednesday after the Federal Reserve indicated it preferred a more gradual path to normalizing U.S. interest rates even as it moved toward its first rate hike in almost a decade.

The dollar tumbled against other major currencies and the U.S. 10-year Treasury yield dipped below 2 percent for the first time since March 2 after the Fed appeared to argue against a June rate hike as many in the market had expected.

The Fed in its statement following a two-day meeting of policy-makers slashed interest rate projections over the next few years and downgraded its outlook on the U.S. economy.

"What's really significant is that they downgraded their assessment of the economy, and that means rates will stay lower for longer. And when they do start to rise, they will go at a much more muted pace," said Mary Ann Hurley, a fixed income trader at D.A. Davidson in Seattle.

Stocks on Wall Street rebounded sharply, rising more than 1 percent, while yields on the benchmark 10-year Treasury note fell more than 140 basis points on the day as markets bet on a September rate hike after the Fed's statement.

The Dow Jones industrial average <.DJI> rose 228.14 points, or 1.28 percent, to 18,077.22. The S&P 500 <.SPX> gained 30.01 points, or 1.45 percent, to 2,104.29 and the Nasdaq Composite <.IXIC> added 58.46 points, or 1.18 percent, to 4,995.90.

Ten-year notes rose 1-9/32 in price to yield 1.9165 percent. U.S. 30-year bonds added 2-5/32 in price to yield 2.5119 percent.

The dollar dropped to two week-troughs against the yen and was last at 120.36 yen, down 0.82 percent.

The euro hit one-week highs against the dollar and was last trading at $1.0799, up 1.91 percent, its biggest single-day gain since October 2011.

The dollar's fall powered oil higher.

Brent settled $2.40 higher at $55.91 a barrel. U.S. crude settled up $1.20 at $44.66 after falling more than $1 earlier on a rise in inventory data.

MSCI's all-country world index <.MIWD00000PUS> of equity performance in 46 countries was up 1.5 percent.

Earlier in Europe the FTSEurofirst 300 index <.FTEU3> of top regional shares rose 0.4 percent to close at 1,590.25.

The FTSEurofirst 300 is up more than 16 percent so far this year and Germany's DAX up 22 percent, even after falling the past two sessions from Monday's record close.

Investors snapped up 3.3 billion euros of 10-year German Bunds at a sale, or almost twice the demand seen last month, as concern grows the ECB's bond buying is creating a shortage of top-rated debt.

The bonds were auctioned to yield 0.25 percent, half the rate offered by the bond and down from 0.37 percent at the previous sale. Yields fell to 0.20 percent.

(Reporting by Herbert Lash; Editing by Leslie Adler and James Dalgleish)

WhatsAppFacebookTwitterLinkedinBeloudBluesky