Roundup: U.S. stocks surge after Fed rate hike

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 its decision 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.

The CBOE Volatility Index, often referred to as Wall Street's fear gauge, fell 14.75 percent to end at 17.86 Wednesday.

In other markets, oil prices plunged Wednesday as U.S. crude stockpiles increased unexpectedly.

The West Texas Intermediate for January delivery moved down 1.83 U.S. dollars to settle at 35.52 dollars a barrel on the New York Mercantile Exchange, while Brent crude for January delivery decreased 1.26 dollars to close at 37.19 dollars a barrel on the London ICE Futures Exchange.

The U.S. dollar decreased against most major currencies Wednesday following the Fed's decision to raise interest rate for the first time in nine years, paring earlier gains made immediately after the announcement.

In late New York trading, the euro rose to 1.0968 dollars from 1.0918 dollars in the previous session, while the dollar bought 121.89 Japanese yen, higher than 121.76 yen of the previous session.

Gold futures on the COMEX division of the New York Mercantile Exchange rose Wednesday, with the most active gold contract for February delivery going up 15.2 dollars, or 1.43 percent, to settle at 1,076.80 dollars per ounce. Endit