NEW YORK, RAW – US stocks have ended sharply higher as investors took in stride the latest signals from the Federal Reserve, including clearing the way for the central bank to reduce its monthly bond purchases soon.
Trading was choppy, however, following the Fed’s latest policy statement in which the US central bank also suggested interest rate increases may follow more quickly than expected.
Overall indicators in the economy “have continued to strengthen,” the Fed said.
Bank shares rose following the news.
Stocks were already sharply higher before the statement from the Fed, with stocks bouncing back as concerns eased over a default by China’s Evergrande.
Strategists said what eventually happens with tightening may be less hawkish than some expect.
“I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year,” said Joseph LaVorgna, Americas chief economist at Natixis in New York.
The Dow Jones Industrial Average rose 341.11 points, or 1.01 per cent, to 34,260.95, the S&P 500 gained 41.54 points, or 0.95 per cent, to 4,395.73 and the Nasdaq Composite added 150.45 points, or 1.02 per cent, to 14,896.85.
Evergrande’s main unit said it had negotiated a deal with bondholders to settle interest payments on a domestic bond, calming fears of an imminent default that could unleash global financial chaos.