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1st LD Writethru: U.S. stocks surge after Fed rate hike

Xinhua, December 17, 2015 Adjust font size:

U.S. stocks rallied for the third straight day Wednesday, as the Federal Reserve decided to raise interest rates for the first time in nearly a decade.

The Dow Jones Industrial Average jumped 224.18 points, or 1.28 percent, to 17,749.09. The S&P 500 leapt 29.66 points, or 1.45 percent, to 2,073.07. The Nasdaq Composite Index soared 75.77 points, or 1.52 percent, to 5,071.13.

After the conclusion of its two-day meeting, the U.S. central bank on Wednesday announced to raise benchmark interest rate by 25 basis points, the first interest rate increase since 2006, marking the end of an era of extraordinary easing monetary policy.

According to the statement released after the meeting, in light of the current shortfall of inflation from the central bank's 2 percent target, the Fed projects that the developments of economic conditions will warrant "only gradual" increases in the benchmark interest rate.

U.S. Fed Chair Janet Yellen said in a press conference that policy would remain accommodative and that the significance of the first hike should not be overblown.

Investors believed that the market has fully factored in the expected rate hike. Some analysts said the decision to raise rates is a vote of confidence in the U.S. economy.

"The statement underscores a desire to raise rates in a gradual manner. The market remains comfortable with an expected gradual path much lower than the one outlined by Yellen today," said Chris Low, chief economist at FTN Financial, in a note.

On the economic front, U.S. privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,173,000, beating market consensus, said the Commerce Department Tuesday.

U.S. industrial production declined 0.6 percent in November after decreasing 0.4 percent in October, the Federal Reserve reported Wednesday. In November, manufacturing production was unchanged from October.

Meanwhile, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers' Index came in at 51.3 in December, down from 52.8 in November. The reading pointed to the slowest improvement in manufacturing business conditions since October 2012. Endit