NEW YORK (AP) — A stock market rally wobbled, then recovered, after the Federal Reserve indicated that it would consider raising its benchmark interest rate at its next meeting in December. Bond yields edged higher and the dollar climbed against other currencies as traders anticipated the possibility of higher interest rates in the U.S.
KEEPING SCORE: The Dow Jones industrial average was up 126 points, or 0.7 percent, to 17,708 as of 3:35 p.m. The Standard & Poor’s 500 index gained 15 points, or 0.8 percent, to 2,081. The Nasdaq composite picked up 43 points, or 0.9 percent, to 5,073.
MIXED REACTION: The Dow average had been up 130 points just before the Fed released its policy statement at 2 p.m. Eastern time, then briefly retreated into the red. By late afternoon it had recovered its earlier gain.
RATES EFFECT: The prospect of higher interest rates on the horizon sent bond yields higher. The dollar rose against the yen and the euro, particularly since central banks in Europe and Japan are still pursuing stimulus policies.
The yield on the 10-year Treasury note rose to 2.09 percent at 3 p.m. Eastern time Wednesday, up from 2.04 percent the day earlier. The euro fell sharply against the dollar, to $1.0911 from $1.1040 the day before. The dollar rose to 121.19 yen from 120.33 yen.
THE DECISION: As expected, the Federal Reserve decided to leave interest rates unchanged, with its benchmark rate close to zero. However the Fed also said it would consider raising rates at its December meeting. Investors had been thinking the Fed would leave interest rates alone until early 2016. The Fed also eliminated remarks from its latest policy statement expressing concern about the global economy.
WHAT’S NEXT: Bob Doll, chief investment strategist for Nuveen Investments, said October and November employment data will play a big role in the Fed’s December meeting.
“If they’re OK, I think the Fed will finally, finally, finally go,” Doll said.
Doll said the Fed will continue to be a major factor in the markets, but once interest rates start rising, Wall Street will pay more attention to economic growth in the U.S. and the slowdown in China.
ENERGY: Oil prices jumped Wednesday after Pemex, the national oil company of Mexico, said it received permission to swap crude oil with the U.S. That could represent a step toward ending the U.S. ban on exporting crude.
Oil prices had been sliding since early October and reached their lowest level prices in two months Tuesday. The 6.3-percent gain Wednesday was the largest increase for U.S. crude since Aug. 31.
U.S. crude climbed $2.74 to $45.94 a barrel in New York. Brent crude, which is used to price international oils, rose $2.24, or 4.8 percent, to $49.05 a barrel in London.
GAINERS: Northrop Grumman surged $10 or 5.5 percent, to $190.60 after the defense contractor said it received a contract worth up to $80 billion to build new bombers for the Air Force. Northrop Grumman stock has been trading at all-time highs.
Apple gained $3.95, or 3.4 percent, to $118.50 after the tech giant reported another quarter of record earnings, boosted by surging sales in China. Apple made its report late Tuesday, and it also forecast healthy iPhone sales during the upcoming holidays.
AIG advanced $2.62, or 4.3 percent, to $63.55 after billionaire investor Carl Icahn said he’s taken a “large” stake in the company. Icahn said the insurance conglomerate should split into three separate businesses. Icahn said his view has support from some other major shareholders.
METALS: Metals prices increased, with gold rising $10.30, or 0.9 percent, to $1,176.10 an ounce and silver adding 43 cents, or 2.7 percent, to $16.29 an ounce. Copper prices stayed steady at $2.36 a pound.
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