Wall Street closes higher after Fed says will keep rates low

Stock indexes are closing higher Wednesday after the Federal Reserve said it expects its key interest rate to remain near zero through 2023. The central bank’s commitment to keeping rates at rock bottom lows comes even as it forecasts the economy will accelerate this year. Wall Street has been anxious about the potential for higher inflation and has been looking for signs that the central bank shares investors’ concerns. The S&P 500 index finished 0.3% higher. The Dow Jones Industrial Average rose 0.6% and the technology-heavy Nasdaq gained 0.4%. The 10-year Treasury yield hit 1.65%, the highest since January 2020.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Stock indexes picked up in afternoon trading Wednesday after the Federal Reserve issued a statement saying it expects to keep its key interest rate near zero through 2023.

The central bank’s renewed commitment to keeping rates at rock bottom lows comes even as it forecasts the economy will accelerate quickly this year. Wall Street has been anxious about the potential for higher inflation and has been looking for signs that the central bank shares investors’ concerns.

The S&P 500 was up 0.3% as of 2:42 p.m. Eastern time after having been down 0.7% earlier. Treasury yields were mostly lower, reversing an earlier move higher. The yield on the 10-year U.S. Treasury note slipped to 1.65%. It had hit 1.67%, at the highest level since January 2020, shortly before the 2 p.m. Eastern time release of the Fed’s latest economic and interest rate projections.

Investors were monitoring remarks from Federal Reserve Chair Jerome Powell during a news conference to see what the central bank may do to combat inflation.

Gains in industrial stocks, banks and companies that rely on consumer spending helped outweigh a pullback in technology, health care and other sectors. The Dow Jones Industrial Average was up 211 points, or 0.6%, to 33,042. The Nasdaq was up 0.2%, shedding earlier losses of as much as 1.5%.

Investors are betting big that the economic malaise will dissipate as spring arrives and more Americans get vaccinated against the coronavirus. The $1,400 stimulus checks the Biden administration began sending to individuals last weekend is also helping. But faster economic activity could also translate into some degree of inflation.

Economists expect Powell will try to convince jittery financial markets that the central bank can continue providing support without igniting inflation. Those worries have recently pushed bond yields higher.

The Fed meeting “carries the potential to either allay or heighten some of the market’s recent concern with regard to the soaring bond yields,” said Jingyi Pan, senior market strategist at IG in Singapore.

Rising bond yields have hurt mostly high-flying technology stocks, which soared last year and have expensive valuations. Those big tech companies were falling again Wednesday, with Apple down 1.2%, Google’s parent company Alphabet down 0.7% and Microsoft 0.8% lower.