World stocks surge on Fed pledge to pause, dollar slips

Wall Street climbs on Apple, Boeing results; Fed decision eyed

Federal interest rates will remain the same for now, the Fed said Wednesday.

At 2:18 pm in NY, the Dow Jones Industrial Average was down 0.22 per cent at 24,958.58 points, while the S&P 500 had gained 0.72 per cent to 2,700.5. The S&P 500 index added 1.6 percent, while Nasdaq Composite climbed 2.2 percent.

Wall Street stocks rallied on Wednesday (Jan 30) following a dovish Federal Reserve announcement and earnings from Apple and Boeing that bested expectations. "The market will read this as they're done with the hiking cycle and that a halting in the balance sheet runoff is more likely than another rate hike". But in his press conference, Powell also denied the Fed's shift was in response to political factors, notably President Donald Trump's criticism of the central bank's rate increases and draining of liquidity from its balance-sheet shrinkage.

The language used in the FOMC statement, keeping the benchmark interest rate in a range of 2.25 percent to 2.5 percent, reflected the increasing sense that the USA economy may have peaked.

Officials at the USA central bank cited muted inflation and "global economic and financial developments" to explain the shift.

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The committee said it will continue to run monetary policy in an ample-reserve regime, where control over short-term interest rates "is exercised primarily through the setting of the Federal Reserve's administered rates".

The downgrade in the Fed's language around rate increases included a change in its description of economic growth from "strong" to "solid", and it noted that market-based measures of inflation compensation have "moved lower in recent months".

"We are now facing a somewhat contradictory picture of generally strong U.S. macroeconomic performance, alongside growing evidence of cross-currents", Powell told reporters.

"If we do get some sort of news of a de-escalation in the trade debacle between the USA and China that would remove a key overhang, a key risk from the equity outlook and would help to place a floor under equity markets broadly".

"At such times, common sense risk management suggests patiently awaiting greater clarity", he said.

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Experts expect the harsh temperatures to ease across the eastern half of the United States by the end of the week. States of emergency have been declared from Wisconsin and MI , down to Alabama and Mississippi.

The Fed, in its policy statement at the end of a two-day meeting, struck the language from its December policy statement that indicated further rate hikes would be appropriate in 2019. He didn't comment on the Fed's actions on Wednesday, but he did tweet "Dow just broke 25,000".

The euro gained 0.39 percent to $1.1475.

The MSCI world equity index, which tracks share performance in 47 countries, rose 1.2 percent following gains in Asia overnight.

It may not be long before that record is broken.

Bond prices fell. The yield on the 10-year Treasury rose to 2.73 percent.

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